October 14, 2014

French economist Jean Tirole yesterday was awarded the 2014 Nobel Prize in economics for his analyses of the best ways to regulate large, powerful industries. In making the award, the Royal Swedish Academy of Sciences characterized Tirole as “one of the most influential economists of our time” who had provided regulators with “a whole new set of tools.”

After earning a doctorate from the Massachusetts Institute of Technology in 1981, Tirole studied the regulation of industries dominated by a small number of firms, such as investment banking and communications. His work is based on the idea that policy rules have different effects, both good and bad, on different industries. He developed a framework for constructing regulatory policies suited to industries–such as cable television companies–where competition does not fulfill the textbook pattern of driving down prices while driving up quality. Tore Ellingsen, chairman of the prize committee, noted that Tirole had broken new ground on “what sort of regulations do we want to put in place so large and mighty firms will act in society’s interest.”