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07/12/2016

French Nobel Prize winner sees Europe as “an opportunity”

Euro & Finance

French Nobel Prize winner sees Europe as “an opportunity”

The French Economist Jean Tirole has been awarded the 2014 Nobel Prize for economics. [International Monetary Fund/Flickr]

The French economist Jean Tirole has been awarded the Nobel Prize for economics for his work on the financial crisis, oligopolies and network industries. The staunch Europhile has also called for labour market reforms. EurActiv France reports

Two days before the presentation of the 2015 French budget, which is already raising eyebrows in Brussels, the Nobel Prize for economics was bestowed on a French economist, Jean Tirole, for his work on the financial crisis.

This news came one week after the announcement of another French Nobel Prize winner, the novelist Patrick Modiano, and has induced spirited reactions from all sides.

 

After Patrick Modiano, we have another Frenchman on top: congratulations to Jean Tirole! What a jab for the French bashers!.

– Manuel Valls (@manuelvalls) 13 Octobre 2014

The French government also responded enthusiastically, saying that the Nobel Prize proved the quality of French research. While France’s debt currently stands at 2000 billion euro, other commentators have drawn attention to the irony that France seems unable to apply its own economic lessons to itself.

Toulouse School

The French economist, who is the head of the Toulouse School of Economics, has done much to educate a new generation of economists. In 1990 he created the Industrial Economic Institute, partly funded by private businesses, which aimed to analyse the organisation of industrial sectors, particularly network industries like rail transport, motorways and telecommunications.

His publication on industrial organisation particularly impressed the Nobel Prize jury, who found that the economist’s work had clarified the economic policy issues for the sectors on which he had worked. Jean Tirole argues that different economic sectors should abide by different rules depending on their specific characteristics.

The prolific author has published around 10 books and 160 articles in the international economics journals. Since 1994, the Nobel Prize for economics had mainly been awarded to Americans, but Mr Tirole has become the most cited economist in economic literature to come from outside the United States.

Arguing for more Europe

In a 2012 interview with La Tribune, the economist expressed his view that the financial crisis occurred because bank debt was not treated as public debt, and so was not regulated in the same way. The creation of the European Banking Authority has partly changed this situation, but Tirole said we must be prepared to “give away more sovereignty […]. We have to create independent budgetary authorities that make realistic growth predictions and task experts to analyse the budget and the state’s balance sheet”.

This Nobel Prize is different from the others, in that it was not directly created by the Nobel family; in the early 20th century, economics was not a university subject.

In an interview with Europe 1 on Tuesday morning, the economist said that it was necessary to create European champions. “To be competitive with foreign countries, we need our own biotech companies, our own Googles.” He added that Europe also needed to “reform the domains of employment and the environment”.

Tirole also offered a Europhile argument, saying that Europe needed greater discipline. “We cannot have such different levels of competitiveness in Europe,” he insisted, adding that Europe was “an opportunity”.

Criticism from the left

While the French government and the Commission have welcomed the French nomination and the political right have highlighted Jean Tirole’s “useful” ideas on labour market reform, the news was not received so positively on all sides. The leftist organisation Attac reacted strongly against what it sees as “patriotic babble” and condemned the idea of easing the Labour Code.

“Jean Tirole is a long-standing believer in the global market of greenhouse gas emission permits. This would turn price and competition into the main tools in the struggle to limit emissions. But the European emissions trading scheme is both a resounding failure and a new theatre of speculation!” Attac declared.

Criticisms have also focused on the philosophy behind this Nobel Prize, which was created not by the Nobel family, but by the Bank of Sweden, and nonetheless remains the most prestigious prize in economics.

Positions

EU Commissioner for Research, Innovation and Science, Máire Geoghegan-Quinn, said: "My congratulations go to Prof. Jean Tirole, who has today been awarded the most prestigious prize for Economic Sciences. He is the third ERC grantee to be a Nobel laureate in this year's awards. This shows that the ERC is clearly funding the best of the best - researchers who truly push the frontiers of knowledge. Europe is and will remain on the map when it comes to first-class research".............

Commission Vice President Joaquín Almunia, in charge of competition policy, said: "I wish to warmly congratulate Jean Tirole. For competition enforcers, his work has been of major importance. He is one of the sharpest economic theorists having contributed to our understanding of market power and how regulation may effectively curb it. We owe Jean Tirole so much. His work has been central to the economic analysis underpinning many of our instruments in competition policy and beyond. This includes work on vertical agreements, mergers, competition in network industries and so much more. I finally also wish to pay tribute to Jean Tirole's renowned humility. "

The governing French socialist party has also welcomed the prize, saying "In its announcement the Royal Swedish Academy of Sciences highlighted the importance of his work on the regulation of the dominant big businesses. He is also one of the main French developers of behavioural economics".

The IFO Institut stated in a press release that "the entire CESifo Group rejoices on his having been awarded the most prestigious prize in the economics profession".

Background

The economist Jean Tirole, who was awarded the Nobel Prize for economics by the Bank of Sweden on 13 October 2014, is a long-time member of the campaign for reform in the labour market in France.

 

He laid out his case in a interview with Le Monde: "For thirty or forty years there has been unemployment, and we have been offering young people short term contracts because the majority of businesses are afraid to offer permanent contracts. This has led to the absurd situation in which we now find ourselves, where by giving too much protection to salaries we no longer protect them at all. It is no coincidence that the whole of Southern Europe, which shares the same labour market institutions, finds itself with high unemployment, while in Northern Europe, for example in Scandinavia, where the system is different, there is relatively little unemployment".

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