Monday, October 13, 2014

Another Reason to Be Suspicious of the Work of the New Nobel Laureate Jean Tirole...

...the beltarians seem to be big fans.

Alex Tabarrok writes:
Jean Tirole (working with Rochet) is a pioneer in one of the most important new areas in the economy and economics, the study of platform markets.
To consider platform market theory an "important new area' in economics shows you how far mainstream economists and beltarians are at understanding the key lessons that economics teaches us. While platform theory does provide some insight, its significance compared to, say, the work of  Israel Kirzner on competition and entrepreneurship theory doesn't come anywhere close.

Platform theory for the most part is about the development and working out of new equilibrium equations in a limited sphere of what is called two-sided networks. Kirzner's theories explain why equilibrium theories are extremely limited in value and take us into the much more important real world of disequilibrium and the market process that results from the disequilibrium.

Tyler Cowen also writes  on support of the Nobel award to Tirole:
It’s an excellent and well-deserved pick.
It should be noted that the Nobel committee specifically cited  Tirole's work "for his analysis of market power and regulation."

This is his work advocating government  interventions in the economy. Indeed, the Nobel committee calls Tirole's study "The science of taming powerful firms."

Which is another way of saying it is about becoming a mechanic for the government and seeing all sorts of ways the government supposedly needs to interfere with markets (and the firms operating within them). In other words, Tirole doesn't understand a damn thing about the lessons taught by the 1974 Nobel prize winnimg Friedrich Hayek and his observations about the impossibility of government central planning and the dangers of the type of tinkering by government advocated by Tirole.

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