[URPE] movement for heterodoxy in France

URPE urpe at urpe.org
Mon Apr 27 08:01:13 MDT 2015


Colleagues,

I'm forwarding a disturbing essay that Evan Jones, my grad school colleague
and Political Economy professor at the University of Sydney, forwarded about
the recent movement for heterodoxy in the French Economics academy and the
powerful pushback. 

Explains Evan:


An online daily Mediapart has a small English language section where they
put up the odd translation, including this one  - a jaundiced view of the
recent second French big shot (after Piketty) to appear on the world stage. 

Tirole's Toulouse school is known at the most orthodox (in the American
sense) department in France.  Unfortunately, economics teaching in French
universities is apparently rather pedestrian everywhere. The handful of
assertive dissident economics (Frédéric Lordon, Jacques Sapir) I think are
mostly in research outfits. And they rarely get invited onto the mainstream
French media, which is full of flunkeys.

Regards,  Ann Markusen

markusen at umn.edu





 

How Nobel prize-winner Jean Tirole led the private sector takeover of French
economic studies 

16 October 2014 |  By  <http://www.mediapart.fr/en/biographie/27> Laurent
Mauduit

Earlier this week the Nobel prize for economics went to French economist
Jean Tirole, who the Royal Swedish Academy of Sciences described as “one of
the most influential economists of our time”. Tirole was awarded the prize
for his work on market power and regulation of large firms’ monopolistic
practices, and the permanent secretary of the Swedish Academy announced that
“this year’s prize in economic sciences is about taming powerful firms”. But
amid the wide acclaim for Tirole in France and abroad, Mediapart economics
and business writer Laurent Mauduit advises caution. Here he argues why
Tirole, the founder of the prestigious Toulouse School of Economics, is one
of the principal champions of the rampant private sector takeover of
economics teaching and research in France, to the detriment of the science
and the public higher education system.

It was with no great surprise that the award to Jean Tirole of “the Bank of
Sweden prize in economic sciences in memory of Alfred Noble”, (more commonly
known as the Nobel prize for economics), was accompanied by a loud chorus of
praise for the 61-year-old French economist.

Those in France who applauded the president and founder of the Toulouse
School of Economics, who is also an Annual Visiting Professor of Economics
at the Massachusetts Institute of Technology (where he obtained a PhD in
economics in 1981), included French Prime Minister Manuel Valls, his new
economy minister Emmanuel Macron, the former presidential advisor to the
late François Mitterrand (and controversial first president of European Bank
for Reconstruction and Development), Jacques Attali, French education
minister Najat Vallaud-Belkacem and former conservative higher education and
research minister Valérie Pécresse

Jean Tirole, 'one of France's most talented, and worrying,
economists'.Jean Tirole, 'one of France's most talented, and worrying,
economists'. © (dr)

But before being swept away amid the outpouring of such moving, unanimous
accolades – and which carry just a hint of chauvinism - it would be
advisable to better understand just who the happy recipient of the
prestigious international award is, for he has also prompted much
controversy. Not least, it is Tirole who has contributed the most in France
to the attempts by the finance sector to take over the highest-level centres
of economic research. He is one of the better known personalities among a
category of experts who I named, in the title of a book I published in 2012,
as being among The Impostors of the Economy.

The international alter-globalization association Attac was one of the very
few to voice criticism of the award of the noble prize to Tirole after it
was announced on Monday. “While a deluge of laudatory comments, in the form
of ‘cocoricos’ [Editor’s note: a French term to describe chauvinistic pride]
are distilled in the media, Attac deplores this choice that is in keeping
with the awarding of prizes to [Friedrich] Hayek, [Milton] Friedman and
other neoliberal economists who are in large part responsible for the
current crisis,” said Attac in a statement published on Monday.

Of course, none of that was mentioned in the official statement by the The
Royal Swedish Academy of Sciences, which explained its jury’s choice of
awarding Tirole the 2014 Nobel prize for economics was for the quality of
his “analysis of market power and regulation". In its official statement,
the Academy noted: “Jean Tirole is one of the most influential economists of
our time. He has made important theoretical research contributions in a
number of areas, but most of all he has clarified how to understand and
regulate industries with a few powerful firms [
] The best regulation or
competition policy should therefore be carefully adapted to every industry's
specific conditions. In a series of articles and books, Jean Tirole has
presented a general framework for designing such policies and applied it to
a number of industries, ranging from telecommunications to banking.”

However, the award is likely to meet with a much more reserved reaction
among the community of French economists. Firstly because the Nobel prize
jury has, over the past two decades, taken the detestable habit of
recognizing only the neoliberal school of thought, with the notable
exception of Paul Krugman, prize-winner in 2008. But economics is not an
exact science. It is a branch of social sciences, inherently meaning that it
is a discipline the richness of which depends upon the plurality of
approaches. With the award made to Jean Tirole, the Academy’s detestable
habit continues for yet another year.

There is another reason why many economists will feel disappointed, and this
is down to the very person of Tirole. For it was he who created, and remains
a director, of the Toulouse School of Economics, which represents the
spearhead in French academia for liberal and ultra-liberal economic
theories. Furthermore, it is he who was among the very first who invited the
world of finance to sponsor economic research in France.

In my book, The Impostors of the Economy, I of course also focussed on many
other economists apart from Tirole. I above all attempted to demonstrate how
the financial crisis had prompted a wide debate in the US about the honesty
and independence of economists, fuelled notably by the documentary Inside
Job. In France, I observed, no serious enquiry into the same issue had yet,
when the book was published in 2012, been mounted.

Referring to the first early works on the topic, notably those of French
economist Jean Gadrey, I went about establishing a list of economists who,
by virtue of their academic status, monopolise public debate in France,
especially in TV studios, but who most often hide the fact that they sit on
the boards of large banks, insurance companies – which in France is illegal
– or who carry out projects paid by such institutions (which is also illegal
in the case of those who do not seek authority to do so from their academic
hierarchy). My investigations focussed on the likes of Daniel Cohen,
Jean-Paul Fitoussi, Jean-Hervé Lorenzi and Olivier Pastré, along with their
friends within the think tank established by Lorenzi, the
<http://www.lecercledeseconomistes.asso.fr/Le-Cercle-des-economistes,5>
Cercle des économistes (The Economists’ Circle), and which is one of
monolithic thought.

In effect I applied myself to establish how the world of finance had
launched a takeover bid for the world of economists, and that some among the
latter had given in, becoming more or less lobbyists for their discreet
employers.

To properly underline the gravity of this trend, I also set about
establishing how the world of finance had also launched a takeover bid for
the entirety of France’s leading economic research sector, and in particular
the poles of excellence among the country’s universities. That was the
reason that I became interested in Jean Tirole. Below, and over the
following four pages, are selected extracts of what I wrote in my book about
the Toulouse School of Economics and, by way of contrast, its rival, the
Paris School of Economics. This does not present an insight into the
personal works of Jean Tirole, but does offer an understanding of the
importance he has acquired in the world of French economic teaching and
research.

                ---------------------------------------------------------- 

Extracts from Laurent Mauduit's The Impostors of the Economy:

It is putting it mildly to say that the world of economics, and thus that of
teaching and universities, has witnessed a sort of epidemic over recent
years, as if a virus has swept through all the higher education sectors
responsible for the teaching of economics, the very same sectors that once
appeared the most protected from such fatal evolutions in order to follow
one single path, that of research and knowledge. It’s not exactly a
‘subprime’ virus, but it resembles the notion. Let’s call it ‘the Tirole
virus’.

In the galaxy of the French university system, the economist Jean Tirole
occupies a place apart. Along with Jacques Laffont (1947-2004), who enjoyed
wide renown for his work into the theory of incentives and regulation, he
created the celebrated Toulouse School of Economics (TSE) which, together
with the Paris School of Economics (PSE), is unquestionably one of the great
French successes [in the teaching of economics].

A leading specialist in industrial economics, and recipient of the French
national scientific research centre (CNRS) Gold Medal, Jean Tirole is one of
France’s top economists, and one of its most talented ones. But let’s say
frankly that he is also one of the most worrying among them, because it is
he who, in Toulouse, allowed, in the most spectacular manner, the wolf into
the sheep pen – or rather, the world of finance into that of higher
education. He gave the example that other universities followed, and which
is at the origin of a true implosion in the teaching and research of
economics in France. 

Brutal acceleration of a thinly-veiled privatisation

It was the Institute of Industrial Economics, the Institut d’économie
industrielle (Idei) - the forebear of the Toulouse School of Economics –
which, at the beginning of the 1990s, acted as the scout, sealing
partnership deals with business companies to create and finance a foundation
made up of teachers and researchers. These were paid more than the
state-provided salary for those in equivalent posts, engaged in new sectors
of research which notably interested the companies. The extra funds were
also used to directly finance a specific chair post.

Following suit, numerous French universities in turn created similar
structures, benefitting from private capital as well as public financing.
Foundations sprang up across the country, with chairs funded by the private
sector. But amidst this process of ‘finance-alisation’ of economics
teaching, Toulouse always remained several leagues ahead of its rivals.

The problem is that the process is subterranean and invisible. All the new
centres that prospered displayed the ambition of being centres of
excellence. All the criteria for validation of this were scrupulously
respected, but nevertheless the world of finance had, in a manner of
speaking, reached the core of the reactor. A law concerning scientific
research introduced in France in 2006, which set up a framework of
organization for this foundation system jointly financed by public and
private funds, as well as by individual patronage (and allowing for tax
reliefs), brutally accelerated this thinly-veiled privatisation of high-end
university teaching and research of economics.

Jean Tirole certainly keenly refutes the corrupting influence of the
financial world’s bid to takeover academia. In an opinion article published
in French daily Le monde on December 11th 2007, he presented a lengthy
defence of his school. “And independence,” he asked. “While strongly funded
by the private sector, American universities are not only places of intense
intellectual effervescence but also extraordinary places of freedom. Can one
fear that it would be different for French universities? I don’t think so.
Firstly because, from personal experience, companies respect the
independence of the [institution that is the] university. In the future,
they will finance the French university [system] collectively to gain access
to well-informed students and experts. To violate this independence would
run against the objectives sought. Independence could, furthermore, be
reinforced by the diversification of partnerships, the constitution of a
capital, the right to publish freely, the validation of studies by major
international reviews (guarantors of quality) and competition between
universities (a restraint upon intellectual excesses).”

But these arguments have difficulty in rallying support because they give
only a slight picture of the implosion of the university system caused by
these unbalanced partnerships with the private sector. To understand the
extent of this, it suffices to consult a report that is beyond suspicion of
bias, which has never been mentioned by the press in France for the simple
reason that it was not made public. The report is by inspectors of the
French national court of audit, the Cour des comptes, on the subject of the
Toulouse School of Economics, and which is published here below.

 
<https://www.scribd.com/doc/87093622/Ecole-d-economie-de-Toulouse-le-rapport
-de-la-Cour-des-comptes> Ecole d'economie de Toulouse: le rapport de la Cour
des comptes by  <https://www.scribd.com/LaurentMauduit> Laurent MAUDUIT

The French court of audit report on the Toulouse School of Economics.

Vast remunerations

The court of audit’s report, covering the years 2007-2010, demonstrates how
the public-private partnership has become something of a strange one. The
Toulouse School of Economics is managed by a foundation, the Fondation
Jean-Jacques Laffont, as allowed by the 2006 law governing research. The
foundation was created by prestigious institutions: the CNRS, the
Paris-based School of Higher Social Science Studies (EHESS), the French
National Institute for Agricultural Research (INRA) and the University of
Toulouse 1. But rather than keeping control of the foundation by inviting
private partnerships on a minority basis, these public institutions did
everything, under Jean Tirole, to give the private sector a major stake,
sharing in the foundation’s management and funding.

During the period 2007-2010, the foundation, with 140 researchers, was
funded as follows: 42.8 million euros were provided directly by the state,
33.4 million euros came from private businesses and 825,000 euros were given
by the public institutions that founded it. For the year 2010, the state
provided 7.5 million euros, the private sector gave 6.825 million euros and
the founders gave 165,000 euros.

Among the outside donators figure finance and insurance group AXA, utility
giant EDF, Electrabel (a subsidiary of GDF Suez) the public financial
institution La Caisse des depots, the BNP Paribas bank, the Crédit Agricole
bank, oil company Total, France Télécom and the French Post Office (La
Poste).

The private sector has almost as many seats on the board of governance of
the foundation as the founding institutions. Apart from its president Jean
Tirole and two other qualified figures, the founding institutions are
representaed by six board members while the business donators have five
seats – representing GDF Suez, France Télécom, Crédit Agricole and BNP
Paribas and investment company Exane.

Thus a large number of the board members governing one of France’s top
economic research centres are from the business and finance worlds, and
notably private banks. These private partners have also brought private
sector practices to the foundation, notably concerning salaries. Whereas the
average monthly wage for a French university professor reaching the end of
his career is around 5,000 euros net per month, the court of audit reported
that the monthly wage of those occupying senior chair posts at the Toulouse
School of Economics, paid by the foundation, ranged from 21,000 euros to
80,000 euros. The auditors wrote in their report that these remunerations
were the result of negotiations between the candidates and the management of
the school which were carried out in conditions “close to opacity”.

Bonuses are paid to researchers whose studies are published in top
international reviews. In 2010, these amounted to a total of 700,000 euros.
This was shared by 46 researchers, athird of the total number, amounting to
15,000 euros each. “The beneficiaries of a junior chair see themselves
offered remunerations of between 35,000 euros to 42,000 euros per year
(double the remuneration of a [public university] lecturer at the start of
their career), plus 10,000 euros for research expenses,” noted the court of
audit.

This is equivalent to a time bomb being placed within the French university
system, and which threatens to reduce its economic disciplines into
fragments. For it creates a two-tier situation, with on the one side a
luxurious university, held by the private sector and with teachers and
researchers paid salaries that are considerably superior to those of the
publicly-financed universities, and on the other the public university of
the poor, with under-paid teaching staff.

 [
] But the consequences of this unmasked privatisation go even further,
for it leads to a very particular method of recruiting researchers. One
could reasonably assume that those economists specialised in issues of
social exclusion and inequalities have little chance of a career at the
Toulouse School of Economics. At the very least, they have fewer chances
than those researchers with a more liberal economic approach and whose
research is focussed more on issues concerning the financial markets. Take
the case of Augustin Landier, recruited by the Toulouse School of Economics
for the new academic year in 2009.

Forced into begging business for money

A graduate of the prestigious Paris-based École normale supérieure,
qualified as an
<http://www.merriam-webster.com/dictionary/agr%C3%A9g%C3%A9> agrégé in
mathematics  and a doctorate from the renowned Massachusetts Institute of
Technology, Augustin Landier founded a hedge fund in New York before joining
the payroll of the International Monetary Fund. As much a trader as an
economist, a speculator as much as a theoretician, Landier is the living
symbol of the dangerous blurring of lines between the world of finance and
academia. He became something of a star of the Toulouse School of Economics,
and was soon invited onto the team of the Economic Analysis Council (au
Conseil d’analyse économique), a panel of economists who act as independent
advisors to the French prime minister.  

 [
] But another set of consequences is equally apparent. It will no longer
be academic criteria – or, at least, not only academic criteria – that will
decide the attribution of funding to one or another research and teaching
centre, for private sponsors will hold significant sway in the matter. Even
among different poles of excellence, the private funders can influence the
choice of fields of research. For example, this can be to give preference to
studies of the financial economy over research into issues of regulating the
economy.

Thos in favour of this privatisation of academic institutions, beginning
with Jean Tirole, dismiss this criticism. They underline that while the
private sector co-finances the foundations – that of Toulouse and others
that have sprung up around France since – there is a firm boundary
established between the management of these foundations and the scientific
activity carried out under them. That is their line of defence and it is a
myth that can be easily exposed.

Another institution as prestigious as the Toulouse School of Economics is
the Paris School of Economics (PSE), created in 2006 and which is also
managed by a similar foundation. The PSE foundation includes major public
institutions that are the CNRS, The École normale supérieure, the School of
Higher Social Science Studies (EHESS), the French national economic research
institute (l’Institut national de la recherche économique) and the
University of Paris I Panthéon-Sorbonne.  The private sector is also
represented on its board, including financial groups AXA and Exane.

 [
] The PSE, which employs around 150 teacher-researchers and economists,
appears to have avoided the excesses of its counterpart in Toulouse. The PSE
has limited the number of seats for private sector donators on the board of
its foundation to just three. The board’s president is Roger Guesnerie,
professor with the prestigious Collège de France. The PSE has thus kept a
reasonable distance between it and the world of finance which is associated
with the school rather than controlling it.

This situation is largely the result of the school’s first head, French
economist Thomas Piketty. Keen to defend his independence and, unlike
numerous other economists, disinterested in high-life socialising, the young
Piketty spent several months away from his research at the end of 2006 and
early 2007 to present the project and find funding. But as soon as the
school was successfully created, he returned to his research and handed the
mantle to François Bourguignon, a former chief economist with the World
Bank. This angered some of Piketty’s sponsors, notably AXA chairman and CEO
Henri de Castries. This mini-crisis that clouded the PSE’s launch finally
contributed to establishing the distance between the school and its private
sponsors.

But here again, one can yet again observe that the system established under
the 2006 law governing research had negative consequences for the PSE.
Firstly, it led to the requirement for researchers and economists to hand
out a begging bowl in the corridors, sometimes slimy, of the CAC 40
[benchmark French stock market index], an unhealthy and humiliating process.
[
] Against the forced-march towards privatization of the Toulouse School of
Economics, the PSE went about defending its independence. But this was
against increasing difficulties, as underlined in another report by the
court of audit (the Cour des comptes) in a report (see below) covering the
period 2006-2009.

 
<https://www.scribd.com/doc/87090247/Ecole-d-economie-de-Paris-le-rapport-de
-la-Cour-des-comptes> Ecole d'economie de Paris: le rapport de la Cour des
comptes by  <https://www.scribd.com/LaurentMauduit> Laurent MAUDUIT

The French court of audit report on the Paris School of Economics.

Dictating the orientation of economic studies

[
] The biggest illustration of the inequalities between the PSE and the
Toulouse School of Economics is in the funding of the schools. The PSE
received just 2.375 million from its private partners when it launched in
2007, way below the amount of private funding for its counterpart in
Toulouse.  The spectacular disproportion in funding highlights the risks of
the rampant privatisation of high-end economic research and teaching,
whereby major banks, insurance groups and industrial giants can favour one
research pole over another.  

It is a sad but logical process. The PSE, which carries a reputation of
being to the Left of Toulouse and more focussed on regulation issues,
attracted less funding than its counterpart which focuses more on liberal,
even ultra-liberal, economic theories. Can one imagine that the reactionary
CEO of AXA, Henri de Castries, would fund, light of heart, the works of
Thomas Piketty which present a damning attack on a world of economic and
social inequalities of which the AXA boss is a symbol? One can imagine that
Castries is hardly an adept of “the fiscal revolution” championed by
Piketty.   

The epilogue to all this was perfectly predictable. At the end of 2010,
Henri de Castries announced he no longer wished to sit on the PSE’s
management board. In January 2011, Exane boss Nicolas Chanut sent a vehement
letter to all the administrators of the PSE announcing that he, too, would
no longer sit on the board.

In this situation where the world of finance holds the commanding position,
the inequalities between the PSE and the Toulouse School of Economics is
also apparent in the wages paid to staff. Unlike Toulouse, the PSE is
confronted with inextricable difficulties in the remuneration of the
economists it employs. To its honour, the PSE did not want to copy the
remuneration system adopted by Toulouse and which dynamites the system of
salaries in French universities. The PSE does top up the level of pay for
researchers in comparison to the public education system, but this is often
a modest increase. Some of its teacher-researchers are invited to give paid
lectures once or twice per month in public institutions such as the Banque
de France.    

What else could it do? In face of practices in the Anglophone world, the
public-sector pay levels are so low that the PSE would lose a number of its
economists, tempted to move abroad, if it had not found a way of topping up
their salaries. The court of audit report detailed the remunerations of the
PSE’s staff. An associate chair is paid between 1,000 euros and 2,000 euros
net per month for 48 hours of master’s course teaching in the year.
Associate professors are paid 3,600 euros net per month for 24 hours
master’s course teaching during the year. Doctorate researchers receive
2,600 euros per month net while post-doctorate researchers are paid 4,000
euros. Quite plainly, pay levels at the PSE lag well behind those of the
Toulouse School of Economics

[
] This system of remunerations is alarming, because the public education
system does not take responsibility for them given that the pay levels do
not correspond with its own salary structure. The PSE economists are not
directly responsible, for it is the infernal logic of poor state funding
that pushes the school into finding an alternative solution on a piece by
piece basis. By leading a policy of austerity, the state joins in a common
cause with the financial world which seeks to grab hold of France’s centres
of excellence in economic research.

[
] Everything adds up, concerning donations and remunerations, to the
situation whereby the PSE is at a disadvantage compared to its counterpart
in Toulouse, and this disadvantage is all the more acute between France’s
public universities and its higher education centres of excellence: while
the state asphyxiates the former, banking and insurance groups finance the
latter. Everything, then, leads to much greater economic research focussed
upon liberal themes dear to finance and industry than that centred upon
issues of closer interest to civil society. Whatever Jean Tirole may say, it
is finance that has hold of the power and - even if the PSE offers
resistance to this, for which it should be applauded - it is in the process
of winning the wider battle.

-------------------------

*	The French version of this article can be found
<http://www.mediapart.fr/journal/france/131014/jean-tirole-prix-nobel-des-im
posteurs-de-l-economie> here.

Laurent Mauduit's book Les Imposteurs de l'économie (The Impostors of the
Economy) is published in France by Pocket, priced 6.80 euros.

English version by Graham Tearse

 

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