Encouraging economic wellbeing
Mirrlees’ most important achievement is establishing an optimal income taxation theory, building on the work of his co-laureate William Vickrey. "Some people are very productive and have a rather high wage rate," Mirrlees explains. "Other people will not be able to earn such a high wage rate, in many cases because they can’t quite do something a higher-level lawyer or a computer programmer can do." But in a world of income inequalities, how can you create a tax system that’s fair and at the same time incentivizes people to be productive?
The desire to create a system that generates as much economic wellbeing as possible is a common one, with ideas rooted in the real world, but the question of how to do this is, says Mirrless, a mathematical one. And he was the ideal candidate to find an answer. Utilizing his complex methodological approach, he argued that there’s an important trade-off between equality and efficiency, and that it’s too easy to simply take the most from people with the highest incomes.
Not ready for retirement
Mirrlees has been living in Hong Kong since 2002. One reason he decided to leave Britain was that there was a fixed retirement age at the University of Cambridge, where he was a professor. And he wasn’t ready to retire. Plus, he thought it was a great opportunity to get close to the Chinese economy, which was at that time developing fast. "I’ve always been very interested in developing countries. Nobody would call Hong Kong a developing country now, but it was very close then."
Global warming: an existential threat
Today, the International Monetary Fund lists China as the world’s second largest economic power. Nevertheless, the figures are a little different when looking at the UN Human Development Index, which ranks countries according to life expectancy, education and per capita income. But Mirrlees notes that wages are rising. Though growth rates are very hard to predict precisely, he assumes that urban wages in the big Chinese cities will change dramatically. However, he underlines that it’s not simply about whether people will be enjoying higher incomes.
China is likely to face the consequences of global warming - flooding in the coastal belt. At the moment, it doesn’t look as though countries are going to adopt sufficiently severe policies to avoid that.
Mirrlees sees many things today from a different perspective. Events that are not everyday news in Europe have become more important to him: territorial disputes in the South China Sea, for example, or the struggle between Japan and China. He also thinks a lot about the situation of Chinese citizens and frequent human rights abuses. "In the 1990s, there was growing freedom for intellectuals in the country. That’s certainly not true now," he admits.
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Do people in Hong Kong need to be braver?
Living in Hong Kong is different from living in mainland China, of course. Mirrlees finds himself in the middle of an interesting, and potentially dangerous, development. While China is trying to gain more and more influence in its administrative region, he says that "A lot of the people I talk to have a very strong sense of being Hong Kongers. I wouldn’t be surprised if they would very definitely vote, given the opportunity, for a maximum degree of independence." Does Hong Kong need more brave people then? Mirrlees smiles. "That depends on how utilitarian you are about these things."
Dealing with real-world problems
Throughout his academic career, Mirrlees has always been interested in development economics. "It’s about getting rid of poverty and poor education," he explains. "How could that not be an important area?" This wasn’t the only reason he left Cambridge for the Chinese University of Hong Kong, but it was his motivation for changing from mathematics to economics when pursuing a PhD. Though Mirrlees continued to work on highly complex mathematics, he got the chance to deal with real-world problems, too.
These real-world problems continue to occupy Mirrlees’s attention. Though he admits that his colleague Angus Deaton has a lot more to say about the topic of foreign aid, for example, he’s come across some notorious examples as well. "It’s clear that a lot of aid projects are a total waste," he admits. He remembers a World Bank report on how investment projects in Africa had performed. "The answer was that they had done pretty badly." The problem was that the success of the people in charge of finding projects to support, was measured by how much money they succeeded in spending. "So they kept wanting to find projects that could be made to look good." But this doesn’t do any good to a country’s economic wellbeing, he emphasizes.
Is there a way for African countries to somehow copy what China has done, a strategy that has been very successful so far? Mirrlees hesitates, arguing that there is no easy answer to the question of sufficient methods for developing countries. "Bring in people with real expertise," he suggests, a small, first step towards a better solution.
The Eurozone; the "sick man" of Europe
Mirrlees, who is Scottish by birth and who, in 1998, kneeled before the Queen, is far from home. But of course he knows what’s going on. He’s a member of the Council of Economic Advisors to the Scottish Government and, as such, he was involved in discussions about the independence referendum in 2014. He looks at Europe concerned, though Brexit doesn’t give him nightmares. "It may take a little while," he suspects.
But I think it’s hard to argue that Brexit is an economic catastrophe. I think it’s more troubling politically and culturally.
When talking about the Eurozone he holds the rather pessimistic view shared by many of his fellow laureates. To Mirrlees, the Euro was a bad deal right from the start, and solutions to the economic crisis get harder and harder every day.