A Tribute to Jean Tirole, Winner of the 2014 Nobel Prize in Economic Science

By Richard Schmalensee on October 14, 2014

On Monday, the Royal Swedish Academy announced that Jean Tirole has won the 2014 Nobel Prize in Economic Science.  It described him as one of the most influential economists of our time, noted that he has made important contributions in a number of areas, and pointed in particular to his work on how to understand and regulate industries with a few powerful firms.Â  The Academy has it right on all points.  It could have gone on to mention that Jean has been both an extraordinarily productive, generous, and engaged scholar and an exemplary academic citizen.  He is one of the good guys, and this award will be very popular among economists.

I have had the pleasure of knowing Jean since he was a star graduate student at MIT, from which he received his PhD in 1981.  Jean was my colleague at MIT from 1984 until he returned to France in 1992, and he returns to MIT regularly each year for short visits.  In France, Jean was one of the founders of what has become the Toulouse School of Economics, and he is now both the Scientific Director of its Institute of Industrial Economics and the Chairman of the Board of its Foundation.  He has been active in professional societies and in public service.

Jean has been an exceptionally productive scholar: his vitae lists 218 research articles and publications and 11 books in English and French; 18 of his publications have at least a thousand Google Scholar citations.  He has indeed made important contributions in a number of areas “ an exceptionally large number of areas.  Jean’s most cited work is his landmark 1988 book, The Theory of Industrial Organization.  A quarter-century after its publication, it is still a standard reference and graduate textbook and sits on the bookshelves of most economists who work on competition policy.  Another much-cited publication that will be familiar to many of those knowledgeable about antitrust is Jean’s now-classic 2003 paper with J.-C. Rochet, Platform Competition in Two-Sided Markets.Â  This seminal paper awoke economists to the existence and many of the special features of multi-sided businesses.  The implications of those especial features for competition policy continue to be studied and debated.  Jean’s other much-cited publications include studies of open-source software, bank regulation, corporate finance, competition in telecommunications, financial markets, authority in organizations, innovation, incomplete contracts, among other areas.

As the Academy recognized, there is a central theme in Jean’s work on such a diverse set of topics: The best regulation or competition policy should ¦ be carefully adapted to every industry’s specific conditions.Â  Jean’s papers typically aim to produce situation-specific insights, not general theorem.  His models are understandable and, in a phrase attributed to Einstein, as simple as possible but no simpler.Â  One learns from his work both about the situation being modeled and about how to model.  Jean Tirole is an exemplary economist who richly deserves the Nobel Prize he has just won.

About the Author

Name
Richard Schmalensee
Title/Location
Director, Boston
Phone
617-374-4700
Expertise
Antitrust/Competition Policy, Financial Regulation