French economist Jean Tirole won the 2014 Nobel Prize for economics for work that has shed light on how governments can "tame" the big businesses that dominate once-public monopolies like railways, highways and telecommunications.

"This year's prize in economic sciences is about taming powerful firms," Staffan Normark, Permanent Secretary of the Royal Swedish Academy of Sciences, told a news conference after awarding the 8 million Swedish crown ($1.1 million) prize.

The academy said Tirole has clarified policies about regulating industries with a few powerful firms, especially after a wave of privatizations had set governments a conundrum over how to encourage private investments in sectors like healthcare and railways while reining in profits.

"My one merit is to have been with the right people at the right time," the 61-year-old, who is unknown to most French, told Reuters in his office at the Toulouse School of Economics in southwest France, where he is a professor.

It was the second Nobel Prize for a French national this year after author Patrick Modiano won the literature award - a fact not lost on Prime Minister Manuel Valls, trying to deflect attacks from France's EU partners over its battered public finances.

"After Patrick Modiano, another Frenchman in the firmament: congratulations to Jean Tirole! One in the eye for the French-bashers!" Valls tweeted on his official account.

Tirole himself was cautious on the economic prospects of his country, where unemployment is stuck at around 10 percent and whose leaders last month broke the latest in a series of promises to bring public lending to within EU limits.

"We need to modernize our country, leaving our children a legacy other than unemployment and public debt that they will have to pay off," he said.

The European Commission's antitrust chief Joaquin Almunia hailed Tirole's work on mergers and other deals with potential repercussions for market competition, adding in a statement: "We owe Jean Tirole so much."

GOOD YEAR FOR FRENCH ECONOMISTS

Tirole has worked for decades on the effects of credit bubbles and said the 2008 to 2009 financial crisis was above all the result of insufficient regulatory institutions.

"I think banking is a very hard thing to regulate and we economists and academics have to do more work on this," Tirole earlier told a news conference in Stockholm by telephone.

In a 2012 French media interview, he said it was "shocking" how U.S. authorities had supported investment banks which, because they did not have small depositors, were not subject to full regulation.

Tirole's research showed market regulations should be adapted to the conditions of specific industries rather than general principles that would apply to every industry, the academy said.

"He has been the dominant figure in industrial organization. It was not a question of whether but when he would be awarded the prize," said Oxford University economics professor Paul Klemperer. "It has given us understanding of how to think about regulating firms, that there is not one size fits all."

The economics prize, officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was established in 1968. It was not part of the original group of awards set out in 1895 will of Nobel, the inventor of dynamite.

Economists from the United States have dominated the prize with only a few winners coming from other parts of the world since 1994.

While economists are rarely household names, previous winners include well-known figures such as Paul Krugman, Milton Friedman, Friedrich August von Hayek and Joseph Stiglitz.

This year another French economist, Thomas Piketty also produced an international best-seller with his book on inequality, "Capital in the Twenty-First Century".