The economy of the common good

The economy of the common good

On 4 May 2017, the Rafael del Pino Foundation organised the dialogue "The economy of the common good" with the participation of Jean Tirole and Manuel Conthe.

Jean Tirole is President of the Toulouse School of Economics, a founding member of the Institute for Advanced Study in Toulouse and Scientific Director of the Institut d'Économie Industrielle. An engineer by training, he directs the École des Hautes Études en Sciences Sociales (EHESS) and is also a visiting professor at the Massachusetts Institute of Technology (MIT), a member of the Conseil d'Analyse Économique and a member of the Académie des Sciences Morales et Politiques. Tirole was awarded the Gold Medal of the Centre National de la Recherche Scientifique in 2007. When he received the Nobel Prize in 2014, the Swedish academy referred to him as "one of the most influential economists of our time".

Economics for the Common Good is an impassioned manifesto for a world in which economics, far from being seen as a "dismal science", is seen as a positive force for the common good. The idea of the common good, one of his great interests, plays a central role in this book, along with his effort to incorporate psychological, social and legal dimensions into the more reductionist idea of traditional economics and attempts to answer all the questions we are asking today about the state of the economy: the digital economy, innovation, employment, climate change, Europe, the role of the state, finance, the market, and so on.


On 4 May 2017, a dialogue on "The Economy of the Common Good" was held at the Rafael del Pino Foundation, on the occasion of the presentation of the book of the same title written by Jean Tirole, winner of the 2014 Nobel Prize in Economics. According to Tirole, the implementation of economic policy has a problem in that politicians have to please the electorate and pressure groups if they want to be re-elected. The electorate, therefore, must be well informed about the indirect consequences of the policies they demand because their effect may be very different from what was expected. Another problem in this regard is psychological in nature and consists of what people want to believe and accept. People do not want to think that growing public debt endangers the welfare system and therefore resist austerity policies. One of these indirect consequences can be seen in the French university system, which has opted for very low tuition fees that subsidise the rich. In addition, there are insider mechanisms that allow those who know how the system works to get the most out of it, e.g. information on the best universities and the requirements for access to them. Another problem is the growing decline in confidence in the markets, with the consequent demands for protection. People are worried about the consequences of the financial crisis, about jobs, about technological change, about climate change, and are looking for a more comfortable framework. Such a framework is offered by populists, who make promises without any spending restraint, using public money. With regard to income distribution, Tirole pointed out that the greater the differences or divisions between individuals, the lower the distribution, because citizens are less willing to spend on those they consider different. This explains that while in the United States there is a lot of income redistribution between states, because there is a sense of belonging to the same community, in Europe this is not the case between EU countries. With respect to the economics of religion, Tirole said that the taxes that have been levied on religious minorities have encouraged people to belong to the majority religion. Religions compete in many countries and do so, in many cases, through the provision of public services that should be provided by the state but are not. Tirole was critical of those who claim that regulatory authorities are not independent. He gave the example of France, where many people want to regain monetary sovereignty so that they can finance the public deficit by printing money. These people do not think about the poor, who are the first to suffer from inflation. Politicians, therefore, should not control the regulatory authorities because that would simply be for the benefit of lobbyists. He also criticised the Paris Agreement to combat climate change. Back home, none of the politicians who approved it said "I'm going to do something about climate change, I'm going to spend to combat it", because what you have is a collective promise without anyone saying who is going to put up the money. One possibility to combat climate change would be a tax on carbon dioxide emissions. Another is to put a ceiling on emissions and create a market in emission rights in which those who emit less than expected can sell the surplus rights. In the same area, he said that more needs to be done in Europe to reduce carbon dioxide emissions. The problem is that there is a risk that companies will relocate and go where they will be charged less for their emissions. On the labour market, Mr Tirole said that workers, not jobs, should be protected. In this respect, he denounced the duality of the labour market, between permanent and temporary workers, and expressed his opposition to temporary work because it impedes the qualification of temporary workers, but he also warned of the need for labour regulations to adapt to a world that is changing at great speed and to which it is increasingly difficult to adapt. In this sense, he believes that immigration is an opportunity, if there are jobs for them, because immigrants generate demand and pay taxes and social security contributions. In this sense, it is a mistake to consider that the number of jobs in an economy is fixed. He also considered that temporary contracts should be limited and that companies that dismiss workers should be made to pay taxes, because they compensate the worker, but do not pay social security contributions and, therefore, citizens have to support them. For this reason, companies must be made more responsible and internalise all aspects related to dismissals. Tirole is in favour of European financial supervision because it has the advantages that there is more experience at the European level in terms of supervision and because the regulatory power over the financial system is taken away from politicians. He also favours the creation of an independent European budgetary authority to monitor fiscal policies. And he believes that the EU should move towards a federal state because it entails better stabilisation mechanisms and imposes common rules. Finally, he referred to the challenges posed by internet platforms. In the specific case of taxis and Uber, he said that if taxis were cheaper, more people would use them, and he considered it a mistake to buy licences at very high prices in order to sell them when the time comes for retirement and finance retirement with the proceeds from the sale of the licence. In his view, technology levels the playing field and does not reduce employment, but helps people to find a job. On the other hand, the platforms offer free services on the one hand and get their income from the other side of the market. This is complicated for competition authorities because on the one hand prices are free and on the other hand they are, or can be, monopolistic. Therefore, this policy has to be redefined and both sides of the market have to be considered together.

The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio González, are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of the authors.

The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio J. González, are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.