“In other words: Back off.” That is how a senior research fellow at the right-wing think tank The Hoover Institution, Stanford, summarizes the quintessential ideas championed by French economist Jean Tirole (WSJ, 13-Oct-14). Tirole has just been awarded this year’s Nobel Prize, the most prestigious recognition in economics. The phrase above is correct. The principal finding in Tirole’s articles and books through the years is that public organs really ought to “back off” from the private marketplace. Namely: there is no need for a central regulator; and there is no need for anti-trust laws. The WSJ op-ed piece quotes a half-regret expressed by industrial-organization figure George Stigler in 1988 about his own support for the breaking-up of U.S. Steel’s monopoly back in 1950. Large firms that dominate their market and enjoy a near monopoly—like Google today, for instance—are fine. They should not be bothered in the name of ancient anti-trust laws, because “the real world [is] plenty competitive” anyway. Even giants facing no meaningful rival are subject to sufficient competition, so the public must not worry or try to rein them in. It is all fine. Another aspect of Tirole’s teachings is that the public also must not rely on regulators. Tirole is against regulation because “a regulator has less information than the firms it regulates”. Take BP for instance. BP knows how to extract oil from the depths of the Gulf of Mexico. But a public regulator is unlikely to know as much about the business of extracting oil than BP. Therefore we must not try and regulate oil companies. We must leave them be. Same with information technology, finance, big pharma, real-estate mortgages, etc. As the chairman of the committee in Stockholm assures us, Jean Tirole’s was not at all a “political prize.” Only science; and science, obviously, is neutral.
Posted on: Sat, 18 Oct 2014 11:55:48 +0000
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