This week the Nobel Prize for Economics was awarded to the French researcher Jean Tirole. It came as a shock for the Toulouse School of Economics, where Tirole is the President of the Administrative Council.
The Nobel jury described him as one of the most influential economists of our time. It said the prize was in recognition of important theories in many different areas.
Euronews’ Antoine Juillard caught up with Jean Tirole in Toulouse.
Antoine Juillard: “Jean Tirole, congratulations on your Nobel prize. It’s great for you and for France as well. You’ve been recognised by the Nobel jury for your work on market power and regulation. What exactly does that mean, using an example or two for our viewers?”
Jean Tirole: “It means making markets more efficient, because we can’t have a laissez-faire attitude in all markets. Some are not competitive. There are difficulties, because there are few businesses, and some sectors will always have only a few companies. Take the electricity distribution network: we’re not going to have fifteen of those in France, there will only ever be one, which is market power, and which means that companies can increase that and set higher prices. So the idea that we had is to carry out research to create guidelines in terms of competition. This allows us to say: “Okay, companies have to be monitored, and sometimes we have to intervene, without damaging the dynamics of the sector.”
Antoine Juillard: “At the moment the European Commission is studying the budgets of member countries, including that of France. What do you make of this extremely risky exercise where a state tries to control its public spending but at the same time provide enough fuel for the development of its economy, its growth. “
Jean Tirole: “Well, it’s normal that a state’s budget is in deficit at a time of recession because there is less revenue from taxes.The big problem is that France has a deficit of 3 per cent of GDP, even when things are going well. We have not had a balanced budget since 1974, for 40 years. And so that’s very problematic, because it means we’re kind of living on credit from overseas. So you have to control that, but it’s not easy at the moment. A lot of effort is needed, that’s for sure, but then we can’t go too far either.”
Antoine Juillard: “A European budget, that would be ideal for the integration of Europe. Would that be a utopia for you?”
Jean Tirole: “We’ve missed an historic opportunity to make a budget for Europe. It’s true that the US has a budget for the United States. This means that when a state is doing badly, it gets a lot of transfers automatically. This includes, for example, unemployment benefits. The state gets a lot of transfers automatically from other states that are doing better. That’s not the case in Europe, as the European budget is quite negligible. There is virtually no European budget. It’s just 1 per cent of the EU’s GDP, which is very small. So there are no such automatic transfers that stabilise countries. Also, there is no common law. For example, take the labour market. The US basically has a labour market with similar laws, from California to New York. That’s not the case between southern and northern Europe. We should’ve had a European budget with similar laws, for the labour market, for bankruptcy, etc. We didn’t do it. We’ve done a lot of things that have been difficult, but unfortunately today I can’t really see northern Europe agreeing to share unemployment benefits and budgets with southern Europe, which is something I’d really like to happen.”
Antoine Juillard: “You’re a member of a council of economic advisers that provide opinions on various economic topics for the office of the French Prime Minister. Are you listened to, and do your suggestions ever become reality?”
Jean Tirole: “Well, sometimes it becomes reality, but the process is quite slow and that’s normal. The economist John Maynard Keynes once said that politicians often listen to economists who are deceased and whose names they don’t know. That’s exaggerating slightly, but it’s true that it takes time, especially when it’s politics-related, when it touches on sensitive topics. For example, obviously labour market reforms create a lot of concern and that’s normal for many people. Just how is it going to happen? It’s very difficult to implement, but hey, that’s how it is. It’s difficult for a politician because there’s public opinion to deal with. It’s their job. Obviously it’s quicker when you have influence over regulatory agencies and authorities, as well as with competition watchdogs in Brussels or Washington.”
Antoine Juillard: “In the media today we’re talking a lot more about the economy than politics. Do you think the governance of a state will be mostly economic in the future?
Jean Tirole: “The economy, including the market economy, needs a strong state. The modern state is a state that is light but strong at the same time. That means it’s not too excessive. And it’s strong in the sense that it’s capable of enforcing competition rules, and of course redistributes wealth through taxation, to avoid monopolies. It’s a state that stands up to lobby groups and carries out reforms.”
Antoine Juillard: “In general the West is managing that okay?”
Jean Tirole: “Well, it’s evident that they’re managing better in northern Europe than in southern Europe. I think we need to look towards the example of all these countries in northern Europe, which like us, have a social model they’re sticking to, but who know how to carry out reforms to achieve this new conception of the state: a more efficient state that keeps all of its assets.”
Antoine Juillard: “Commenting on your Nobel prize, some have said they would have preferred a Nobel for the left. Do you consider yourself to be right-wing?”
Jean Tirole: “Listen, once again, I have my own political views. But if my research is beginning to be influenced because I want to be on the left or the right, I think that’s a disaster. I want to stay completely independent. On the whole most well-known economists have the same scientific background, and so they reason in the same way, sometimes with slightly different views on topics that are difficult, because of course we don’t know everything. There is a consensus on a certain number of subjects, and then there are topics that are extremely difficult, which we can disagree about. But these disagreements are solved with the same scientific methodology. We discuss them with the same scientific methodologies and that is the science in a way. It’s not about trying to have political biases, ideologies, or being hemmed in by lobby groups or industry. That is not science.”
Antoine Juillard: “I imagine you’ve been in big demand for media interviews since winning the Nobel Prize?”
Jean Tirole: “I don’t know how many I’ve done. It’s strange because I’m actually a researcher. Look at my office, that’s where I like to live. And then all of a sudden there was this whirlwind that arrived and every 15 minutes they handed me the phone. I was interviewed in a TV studio, which I’m not use to, and which I’m not good at. So there you are, it’s a new life. I know it will go on for two or three months. After I think it will calm down and I will return to my research work.”
Antoine Juillard: “If it’s not too indiscreet, what are you going to do with the 878,000 euro prize money?”
Jean Tirole: “This is a huge amount and frankly I haven’t thought about what I’m going to do with it. That really was something, another surprise. Already I was very surprised to receive the call about winning, and it’s true that it’s extremely rare to have just one economist chosen. I’m incredibly honoured, because it’s such a massive thing.”
Antoine Juillard: “So you haven’t thought about it?”
Jean Tirole: “No it takes a few months to completely sink in. After returning from Stockholm, I’ll start to come down from the clouds.”