Frenchman wins Nobel in economics for work on ‘taming powerful firms’
A French economist on Monday won the Nobel Memorial Prize in Economic Sciences for his research on market power and regulation -- an award that carries political overtones as nations and governments grapple with how to limit the risks of industry-dominant firms in the wake of the global financial crisis.
In announcing the $1.1-million prize to Jean Tirole, 61, a professor at Toulouse 1 University Capitole in southwestern France, the Nobel committee said his theoretical work had made major contributions especially in the understanding of “taming powerful firms.”
Members of the Royal Swedish Academy of Sciences said at a news conference that they were not making a political statement with this year’s economics prize.
Yet many experts believe the seeds of the global financial crisis and Great Recession were sown with deregulation policies that allowed big companies in banking, finance and other industries to expand their market reach and take excessive risks to boost profits. Governments on both sides of the Atlantic have sought to tighten regulation on large banks and other firms, some of which required bailouts during the crisis to avert more damage to the broader economy. What’s more, European officials have put increasing pressure on dominant technology firms such as Google, wary of their great market power.
Tirole, speaking by phone from Toulouse, France, while taking questions from reporters in Stockholm after the announcement, noted the challenges of devising regulations for monopolistic companies like Google, which he described as having two sides of the market. There are the ordinary customers who get a good deal in low-cost use of the search engine, he said, and then there are advertisers and others that pay a relatively hefty price to do business with it.
“Such monopolization is not dangerous as long as there is a possibility of entry,” Tirole said.
In its news release, the Nobel committee said: “The best regulation or competition policy should therefore be carefully adapted to every industry’s specific conditions. In a series of articles and books, Jean Tirole has presented a general framework for designing such policies and applied it to a number of industries, ranging from telecommunications to banking. Drawing on these new insights, governments can better encourage powerful firms to become more productive and, at the same time, prevent them from harming competitors and customers.”
Though not widely known outside the academic world, Tirole has been working in the field of economics known as industrial organization for three decades, employing game theory and psychology to develop theoretical underpinnings of how big firms, monopolies and cartels operate, and how best to regulate them.
Tirole began his research shortly after receiving a doctoral degree from MIT in 1981 just as the era of deregulation was unfolding.
Officially known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, the award has long been dominated by Americans. The last person to win the award in the same field of work as Tirole was George Stigler of the University of Chicago in 1982, Nobel officials said.
Last year the Nobel in economics was awarded jointly to a trio of American scholars -- Eugene F. Fama, Lars Peter Hansen and Robert J. Shiller -- for their analysis of asset prices and bubbles.
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