ECONOMICS FOR THE COMMON GOOD

If you were to choose the time and place in which to be born, what would be your choice? Leading economist Jean Tirole believes the answer to this question is at the centre of how Economics can create a better world. Winner of the Nobel Prize for Economics in 2014, Tirole is on a mission to show how economists can make a difference to every aspect of our society. He starts with the concept of the market economy, which has been assumed to be a marker of democratic freedom since the fall of the Berlin Wall and the economic transformation of China. Privatisation, globalisation, and an emphasis on competition have taken over from the decisions of elected politicians, and what remains of public decision-making has increasingly relied on regulatory bodies. For many, this process has meant the abandonment of the concept of the Common Good and disintegration of the "social contract" whereby people have a tacit agreement to try to live together in harmony. The author argues that people react to the incentives facing them and therefore that to re-establish a commitment to the Common Good, institutions need to reconcile the private interest of individuals with the interests of society. Tirole starts by explaining the work economists do, with its key complementarity of theory and empirical investigation, looking in depth at game theory and information theory which have revolutionised our understanding of economic institutions, and placing economics within the social sciences. The two institutions of the State and the Firm need to be kept in balance. The market and the state are not alternatives but are mutually dependent, and their dependency is mediated through some highly visible institutions, such as public transport, and others that are invisible, such as long-term debts that are kept off the balance sheets. The example of France is examined in depth as a paradigm of state reform. Key economic challenges facing all states include climate change, the labour market, the future of Europe, digitisation, intellectual property and sector regulation. 563pp, diagrams.