Sir James Mirrlees passing on his wisdom to young economists at St Petersburg State University in 2010
James Mirrlees’s first thought was that he was the victim of a prank. “My second thought was to check the [phone] call was genuine,” he said. Having ascertained that it was real, he was “full of glee” at sharing the Nobel prize in economics in 1996. “My subject has always been economics and human welfare,” explained the softly spoken Scot. “It is a delight to have been able to contribute to that field and to have it recognised.”The award was for Mirrlees’s work on “information asymmetry”, which is about making transactions with imperfect knowledge. “That just means not knowing as much as you would like,” he explained. Information asymmetry is where one party, the buyer or the seller, knows more about the goods or the service than the other. People selling their home know more about the house than a buyer; those seeking health insurance know more about their health than the insurer.Mirrlees studied the applications of information asymmetry, exploring why buyers and sellers failed to possess all the information they needed when making a purchase or a sale and the implications for any deal. In insurance, for example, high-risk customers such as smokers, the elderly or those living in difficult environments may be more likely to take out cover. This could raise premiums for all customers, forcing the healthy or those who live in safe environments to withdraw. The solution is to perform actuarial work, screen all customers and charge different premiums based on potential risks.Receiving the Nobel prize was not the greatest day of Mirrlees’s life. That had been in 1968, when, according to the man once described as a self-effacing academic’s academic, “I finally cracked the optimal tax problem . . . It came in a flash and was very satisfactory.” He had been investigating the links between levels of taxation and motivation to work and concluded that British tax rates could reasonably be higher, “particularly for middle-income earners”, adding: “It could become a disincentive, but you could use the revenue for health services, education and welfare.”
James Mirrlees’s first thought was that he was the victim of a prank. “My second thought was to check the [phone] call was genuine,” he said. Having ascertained that it was real, he was “full of glee” at sharing the Nobel prize in economics in 1996. “My subject has always been economics and human welfare,” explained the softly spoken Scot. “It is a delight to have been able to contribute to that field and to have it recognised.”The award was for Mirrlees’s work on “information asymmetry”, which is about making transactions with imperfect knowledge. “That just means not knowing as much as you would like,” he explained. Information asymmetry is where one party, the buyer or the seller, knows more about the goods or the service than the other. People selling their home know more about the house than a buyer; those seeking health insurance know more about their health than the insurer.Mirrlees studied the applications of information asymmetry, exploring why buyers and sellers failed to possess all the information they needed when making a purchase or a sale and the implications for any deal. In insurance, for example, high-risk customers such as smokers, the elderly or those living in difficult environments may be more likely to take out cover. This could raise premiums for all customers, forcing the healthy or those who live in safe environments to withdraw. The solution is to perform actuarial work, screen all customers and charge different premiums based on potential risks.Receiving the Nobel prize was not the greatest day of Mirrlees’s life. That had been in 1968, when, according to the man once described as a self-effacing academic’s academic, “I finally cracked the optimal tax problem . . . It came in a flash and was very satisfactory.” He had been investigating the links between levels of taxation and motivation to work and concluded that British tax rates could reasonably be higher, “particularly for middle-income earners”, adding: “It could become a disincentive, but you could use the revenue for health services, education and welfare.”
