After last year’s three-way split, the Nobel Prize for economics has this year gone to a single recipient, Jean Tirole of Toulouse University. Unlike some previous recipients such as Robert Engle and Clive Granger in 2003 or Lars Peter Hansen in 2013 who won the prize for developing new econometric methods few laymen can easily understand, Tirole’s research has direct relevance to current policy issues. It is 25 years since a French economist last received the award, which was first handed out in 1969. It has been won by 74 individuals, some of who are familiar names such as Joseph Stiglitz—with whom Tirole has worked—James Tobin and Milton Friedman.
Praising Tirole’s attempts to “tame powerful firms”, the committee awarding the 8m kronor (£750,000) prize said the French professor was “one of the most influential economists of our time”. The committee chose an area of economics that has become increasingly important as governments have privatised former public monopolies such as water, electricity and telecom and Tirole’s work has been adopted by competition regulators worldwide. Most notably, his ideas of how to regulate industries dominated by a single firm are helping produce strategies on how to prevent Google from using its vast market share in the Internet search business to act as a monopoly.
The rigour that Tirole brings to basic questions of incentives is clearly missing in the debate on Indian corporate bodies, as well as on public policy. In one of the few theoretical papers of quality to focus on the incentives behind public-private partnerships (PPPs) for example, he cautions that “PPP contracts (between a bureaucrat and a company) need to be carefully reviewed by independent authorities that can expose hidden rent backloading”. This insight is something that Indian policymakers are only now accepting after considerable pain, though a clear independent authority is still not even on the anvil.