STOCKHOLM — French economist Jean Tirole won the Nobel prize for economics Monday for research on market power and regulation that has helped policy-makers understand how to deal with industries dominated by a few dominant companies.
Calling Tirole "one of the most influential economists of our time," the Royal Swedish Academy of Sciences said he's made contributions in a range of research areas. But it highlighted his role in clarifying "how to understand and regulate industries with a few powerful firms."
Tirole, 61, works at the Toulouse School of Economics in France and has a Ph.D. from Massachusetts Institute of Technology in 1981. Tirole was also a full-time professor at the university for about six years and now holds a visiting professorship.
MIT Professor Nancy Rose said Tirole teaches in her Industrial Organization class every year, which she says will be even more attended from now on.
“Jean has always been an extremely popular lecturer. He is extraordinarily clear. He has the ability to take extremely complex problems and distill them into what the essential features of them are,” Rose said.
Tirole also teaches a graduate-level special problems course each summer at MIT, and faculty often sit in on it, too. Rose says Tirole’s work is important because he’s a theorist who’s not afraid to get into messy economic problems that apply to regulating big companies today, making his research particularly important to policy makers.
“What’s been great about much of Jean’s work is that he’ll start with a problem that people are struggling with," she said. "Whether it’s the design of patent policy or something as mundane as electricity regulation, Jean will spend time digging into what are the salient institutional features of those markets and embed those in his modeling in a way that makes the results of what he does extraordinarily informative, insightful, and useful.”
Left unregulated, industries that are dominated by a few single firms can produce undesirable results, such as unnecessarily high prices or unproductive companies blocking new competitive firms from entering the market. From the mid-1980s, Tirole "breathed new life into research on such market failures," the academy said, adding his work has strong bearing on how governments deal with mergers or cartels and how they should regulate monopolies.
"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," the academy said.
Harvard University professor and economist Philippe Aghion said on France's BFM television Monday that Tirole's work is particularly useful to governments as they try to determine the best level of regulation, notably regulation of banks after the global financial crisis in 2008. "Tirole is at the frontier of this domain," Aghion said.
In a 2012 interview, Tirole told the financial journal Les Echos that the 2008 financial crisis stemmed primarily from regulatory failure. "The vision according to which economists have unlimited trust in the efficiency of markets is 30 years behind the times," he said.
It was the first economics prize without an American winner since 1999.
"I'm so moved," Tirole said, speaking to a news conference in Stockholm on a telephone link from Toulouse.
Before Tirole, the academy said, policy-makers advocated simple rules including capping prices for companies with a monopoly and banning cooperation between competitors. Tirole showed that in some circumstances, such rules can do more harm than good.
Drawing on insights based on Tirole's work, "governments can better encourage powerful firms to become more productive and, at the same time, prevent them from harming competitors and customers," the academy said.
The economics prize completed the 2014 Nobel Prize announcements.
In Nobel Prizes awarded last week, Taliban attack survivor Malala Yousafzai, 17, became the youngest Nobel winner ever as she and Kailash Satyarthi of India won the peace prize for fighting for children's rights. French writer Patrick Modiano won the literature prize for his lifelong study of the Nazi occupation and its effect on his country.
U.S. researchers Eric Betzig and William Moerner and Stefan Hell of Germany shared the chemistry prize for finding ways to make microscopes more powerful than previously thought possible; while Isamu Akasaki and Hiroshi Amano of Japan and Japanese-born U.S. scientist Shuji Nakamura won the physics prize for the invention of blue light-emitting diodes used in mobile phones, computers and TVs.
The awards will be presented on Dec. 10, the anniversary of prize founder Alfred Nobel's death in 1896.
Even though the economics award is not an original Nobel Prize - it was added in 1968 by Sweden's central bank - it is presented with the others and carries the same prize money.
Last year the economics prize went to three Americans who shed light on the forces that move stock, bond and home prices.
WBUR's Curt Nickish in Boston and AP's Lori Hinnant in Paris contributed to this report.