Hard-to-categorize French economist Tirole wins Nobel Prize
A 61-year-old Frenchman on Monday won the 2014 Nobel Prize for economics for work that has shed light on how governments can “tame” the big businesses that dominate once-public monopolies like railways, highways and telecommunications.
American consumers might be paying less than they are for cable and Internet access if regulators had followed the guidance of Jean Tirole in promoting industry competition, his supporters said.
“He has given us an instruction manual for what tool to use in what market,” said Torsten Persson of the prize committee. “Politicians would be stupid not to take his policy advice.”
Joshua Gans, management professor at the University of Toronto, said regulators in the United States did not follow Tirole's advice to require cable and phone companies to sell competitors access to “the last mile” of cable connecting homes to telecommunications networks. Instead, giants such as Comcast and Time Warner now control the last mile.
To reach a home, a potential competitor must pay to install its own cable. That limits competition and allows existing telecom providers to charge more. As a result, Gans said, American consumers pay too much for cable TV and Internet access.
Tirole, a professor at the Toulouse School of Economics in France who earned a doctorate from Massachusetts Institute of Technology, cannot be easily categorized as pro- or anti-regulation.
He agrees with free-market advocates that “because firms know more than regulators, regulation is necessarily going to be imperfect,” said Eric Maskin, a Harvard University economist who taught Tirole at MIT and who won a Nobel prize in 2007.
“But that doesn't mean there shouldn't be regulation. You have to be very careful so you don't do more harm than good.”
Tirole has worked for decades on the effects of credit bubbles and said the 2008 to 2009 financial crisis was above all the result of insufficient regulatory institutions.
“I think banking is a very hard thing to regulate, and we economists and academics have to do more work on this,” Tirole said.
In 2012, he said it was “shocking” how American authorities had supported investment banks, which because they did not have small depositors, were not subject to full regulation.
This is the first year since 1999 that an American has not been among the economics prize winners.
Reuters contributed to this report.