2014’s Nobel Prize in Economics Goes to MIT Alumnus

The 2014 Nobel Prize in economics has been awarded to Jean Tirole, a PhD alumnus of MIT, for his work in analyzing market power and regulation.

Jean Tirole completed his PhD at MIT in 1981, before becoming a professor in economics at the school between 1984 and 1991. He is now the director of Institut d’Économie Industrielle, Toulouse School of Economics, but remains a visiting professor with MIT – the university press of which has published a number of his books.

With the plaudits of winning a Nobel Prize in economics (officially, The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) comes a prize of SEK 8 million (just over US$ 1 million). Perhaps more importantly, it has been suggested that it also helps previous winners bring their theories closer to realization through government policies.

In his work, Jean Tirole has considered how governments should regulate monopolies and those firms which exert strong market power, to conclude that any such policies should be adapted to an industry’s specific conditions.

‘We need competition’ says Jean Tirole

Tirole's subsequent framework can be applied to an industry, such as banking or telecommunications, to help governments “encourage powerful firms to become more productive and, at the same time, prevent them from harming competitors and customers,” according to a press release.

“It’s true that we need competition. That competition doesn't come about easily in such industries by definition, so that's why you need an academic framework to analyze this,” said Jean Tirole, who paid tribute to his late colleague, Jean-Jacques Laffont, describing him as a mentor.

The MIT alumnus is the first French economist to win the Nobel Prize in Economics since Maurice Allais, more than 25 years ago.

One of last year’s three joint winners, Yale professor Robert J. Shiller, also completed his PhD at MIT. Shiller shared the award with Chicago Booth professor, Eugene Fama, and Lars Peter Hansen, economics professor at the University of Chicago, for their work on the ‘empirical analysis of asset prices’.

Watch an interview with the Royal Swedish Academy of Sciences' Tore Ellingsen, following the announcement of the 2014 Nobel Prize in economics: