The Free Market Lives On in France


In his latest book, Nobel Prize-winning French economist Jean Tirole addresses the problems of the modern economy with market-based solutions.

From an American perspective, the French have never embraced the free market. France has the second-highest ratio of spending to GDP and the fourth-highest rate of taxation among all OECD [Organisation for Economic Co-operation and Development] nations — outpaced only by its Scandinavian neighbors. France’s new president Emmanuel Macron, a former economic minister and investment banker, is committed to restructuring the French economy. It’s too early to bet that he will succeed, as his reform campaign has pitted him against the various vested interests within the nation’s public sector.

In his fight for market reforms, Macron can, however, count on the support of the French economic intelligentsia. Thomas Piketty’s 2014 bestseller Capital in the Twenty-First Century may have fixed in the popular imagination the image of the French socialist professor, but France’s most renowned economists firmly support free markets, and have done so for decades. Economics for the Common Good, a new book by Nobel Prize-winning economist Jean Tirole, is the latest entry in the French free-market tradition, making the case for an open and nimble economy.

Though the book covers a broad range of economic topics, one overarching credo undergirds each argument: Tirole — founder of the renowned Toulouse School of Economics — insists that one cannot be a true economist while opposing the free market. Economics for the Common Good addresses many of the most confounding public policies in France and around the world, and shows how non-statist solutions offer the best outcomes. Tirole’s book is written for the layman, and does a marvelous job of encapsulating the last 50 years of progress in economic science.

Tirole’s analysis of climate change demonstrates his pragmatic method. While progressive leaders support a range of interventions to tackle carbon emissions — from renewable-energy subsidies to vehicle fuel-efficiency standards — Tirole argues that a universal carbon tax is the only way to impose a cost on emissions without undue market distortions. In this light, Tirole shows that environmental politicking, as exemplified by the Paris Agreement, has been largely concerned with symbolic stances, rather than enacting economically feasible regulatory policies.

In France, Tirole is perceived as a classical liberal, a label he tacitly accepts, while arguing that the best economic scholars have moved beyond the debate between Keynesianism and laissez-faire. He sees economics as a science beyond ideology; believing in the effectiveness of markets is less a political position, he believes, than an acceptance of basic facts. The chapter exploring the future of jobs demonstrates this clearheaded approach. Tirole argues that the so-called “Uberization” of the workforce — service workers performing tasks on demand as contractors — has been grossly overrated. For all the headlines dedicated to the “gig economy,” this kind of work represents less than one percent of the U.S. job market. Will jobs disappear because of automation? Tirole acknowledges the many industries in which machines are fulfilling increasingly sophisticated functions but also shows that most of these shifts don’t obviate the need for qualified workers. In the commercial-banking industry, for instance, ATMs have replaced thousands of tellers but have also freed up banks to open more branches — enabling the hiring of more workers. The same trend will repeat itself across more industries: the overall number of jobs is unlikely to diminish, though the proportion of high-paying, middle-skilled jobs may decrease, driving up the income gap in developed countries.

With his usual frankness and optimism, Tirole offers various suggestions for how to soften the blow of these changes. In particular, he endorses the idea of a guaranteed income, which would preserve a baseline quality of living without requiring the government to prop up specific industries. Tirole is also a strong supporter of the European Union, the rationale for which often escapes American observers. Before the E.U., he recalls, many continental governments implemented counterproductive economic policies and printed money to cover their expenses. The creation of a common currency has saved Europe — particularly France and Italy — from the historical scourge of inflation.

In France, Economics for the Common Good will no doubt become a staple of economics education, helping to cleanse curricula of ideological and unscientific tendencies. The book is part of a broader closing of the door on Marxist economics in France. Tirole thus reconnects with an older French free-market tradition as it existed in the first half of nineteenth century, when intellectual leaders such as Frederic Bastiat and Jean-Baptiste Say led a revolution in European economic thought.