Jean Tirole (Troyes, France; 1953) trained originally as a civil engineer before going on to obtain a PhD in Mathematics from Université París-Dauphine (1978), followed by a PhD in Economics from Massachusetts Institute of Technology (MIT) (1981). He is currently Director of the Jean-Jacques Laffont-Toulouse School of Economics Foundation and Scientific Director of the Institute for Industrial Economics (IDEI) in the same French city. He also holds positions at MIT, the École de Hautes Études en Sciences Sociales (EHESS) and the Institut de France. He is a member of the country’s Academy of Moral and Political Sciences and was among the founders in 2011 of the Institute for Advanced Study in Toulouse.
Considered one of the most influential economists of our time, after receiving the BBVA Foundation Frontiers of Knowledge Award (2008) he went on to win the Nobel Prize in Economics (2014). His other distinctions include the Gold Medal of the Centre National de la Recherche Scientifique (2007) and the Ordre National du Mérite (2010). He is a Chevalier (2007) and Officier (2015) of the Légion d’Honneur .
Jean Tirole has published over 200 paper and 14 books, the latest of which, ‘Economics for the Common Good’ (2016), has been translated into various languages.
Speech
Economics, Finance and Management, 1st edition
What have the financial crisis and global warming got in common? The obvious answer is that they are two of today’s most pressing problems. But another possible, though more esoteric answer, is that they are among the economic challenges that inspire the work of Professor Jean Tirole, winner of the BBVA Foundation Frontiers of Knowledge Award in the Economics, Finance and Management category, and the author of acclaimed studies applying Game Theory and Information Theory to economic analysis.
“Inspiration”, according to Jean Tirole, is what sets him mulling over the causes and effects of the economic issues of our times: from macro concerns like recession or global warming to more concrete issues like antitrust policies or labor market reform. He has authored over one hundred and fifty articles to date plus a number of texts that are international reference works. But all these attainments he puts down to “a matter of luck, being in the right place at the right time”, because, he explains, he began his career “just as two interesting mathematical theories came to the fore: Game Theory and Information Theory.”
A matter of luck, or perhaps an ability to think outside the box; to see how these theories could be wrenched from the domain of mathematics and applied to economic theory.
Game Theory predicts the strategies that will be chosen by players with conflicting interests in a given situation, and is now among the dominant theories in economic analysis. It tries to divine the best option available to a player when he or she has no foreknowledge of the costs and benefits of a situation, since both depend on the choices made by other actors equally in the dark. The theory has found applications in such diverse fields as political science, philosophy, ethics, biology, cybernetics and artificial intelligence.
Information Theory, as employed by Tirole, describes how these players go about using inside information in a strategic way, and the French economist has successfully applied it to the study of public and private organizations of all sizes, and how they interact with the markets.
Jean Tirole refers to both theories as “economic instruments” which can be turned to the study of such varied questions as conflictive behavior in organizations or the optimal design of contracts. He has also been looking at some of the causes behind today’s economic downturn, like flaws in financial sector regulation or the shortage of market liquidity.
This initial application to economics of a tool devised for other fields has very much set the style for his research career. Asked to describe his work, he invariably alludes to “building bridges” between economics and other social science disciplines, particularly psychology, sociology and political sciences. And he does so “in the firm conviction” that all the social sciences study “essentially the same material, either in isolation or a social context, which is why they have so much to learn from each other.”.
Since his student days (he first trained as a civil engineer then went on to obtain a PhD in mathematics from the University Paris-Dauphine, and another in economics from the Massachusetts Institute of Technology), Tirole has felt the need to break down interdisciplinary barriers, though without straying too far away from his home base in economics. In this science he claims to have found “a discipline offering intellectual challenges open to rigorous analysis, but also the chance to have a real impact on public policies.”
He also believes that research outcomes must be taken up by policy makers: “I unqualifiedly share the view that policy design should be based on rigorous, fundamental research.” In return, researchers should be alert to the issues that concern society and strive to provide it with innovative, viable solutions.
A staunch defender of the academic system, he singles out among its many benefits the freedom and independence enjoyed by researchers. “For me, academic research is all about being able to run with an idea and see where it leads, free of outside interferences or personal preconceptions,” explains Tirole. But this does not mean excluding his peers. Contrary to most people’s impression, collaborative working “is the rule, not the exception” in economic research, he contends. “Tapping into a diversity of talents, keeping up morale in the inevitable moments of despair, and the sheer pleasure of working with friends … All these factors make research a quintessentially shared activity.”
And also an activity that must be encouraged and respected: “Scientific activity is vital for modern societies. Job creation and business development increasingly rely on transferring scientific knowledge to technological solutions”. On the subject of today’s crisis, he is adamant that “investing in better education and research is the key to restoring growth to our economies.”
Jean Tirole is currently director of the Toulouse School of Economics’ Jean-Jacques Laffont Foundation –named for an economist he worked with in the past, and a fellow specialist in economic applications of Game Theory– and scientific director of the Industrial Economics Institute of the same French city.
From these twin vantage points, he picks two issues that will likely absorb his attention in coming years: the implications of certain aspects of microeconomic models for financial crises, rescue deals and monetary policy, and the fertile interaction of economics and psychology. Two future directions for Jean Tirole’s work in which research interest again coincides with the pursuit of the public good.
