What do Nobel Laureates think of today’s economy?

Congratulations to the French economist Jean Tirole, who today received the Nobel Prize for economics – or, to give it its full title, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel – for his analysis of market power and regulation. His work sheds light on how policy-makers should deal with sectors where only a few firms wield power, leading to the risk of monopolies.

It’s an issue that will only become more relevant, as emerging economies around the world steer a course through the choppy waters of competition and regulation. Indeed, Tirole’s predecessors continue to shape the way we understand the world economy, years after receiving the honour. Here are three recent perspectives from former winners of the prize:

We could be heading for another financial crisis. “The belief that markets are always efficient can survive only when some people do not completely believe it and think that they can profit by timing the markets,” writes Robert Shiller in July, 2014. He received the award in 2013 along with Eugene Fama and Lars Peter Hansen for research on asset prices.

What do China and the US really teach us about inequality? “Inclusion sustains social and political cohesion – and hence the very growth needed to help mitigate the effects of rising inequality,” writes 2001 winner Michael Spence in August, 2014. He collected the award, along with George Akerlof and Joseph Stiglitz, for analysing markets with asymmetric information.

Why austerity isn’t working in Europe. “To say that the medicine is working because the unemployment rate has decreased by a couple of percentage points, or because one can see a glimmer of meager growth, is akin to a medieval barber saying that a bloodletting is working, because the patient has not died yet.” Joseph Stiglitz makes his feelings about austerity clear in this column from September, 2014. He shared the 2001 prize.

 

Image: A shipyard is silhouetted against the rising sun in Dalian, China. REUTERS/China Daily

Author: Ceri Parker edits the World Economic Forum’s blog.