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James Mirrleeswas a Scottish economist known for his analytic research on economic incentives in situations involving incomplete, or asymmetrical, information. He shared the 1996 Nobel Prize in Economic Sciences with William Vickrey of Columbia University.
Mirrlees studied mathematics at the University of Edinburgh (M.A., 1957) and Trinity College, Cambridge (Ph.D., 1963). He was a lecturer at the University of Cambridge (1963â68) before moving to the University of Oxford in 1969. In 1995 he returned to Cambridge, where he became professor emeritus in 2003. One of Mirrleesâs main contributions was his pathbreaking work on optimal income taxationâa progressive tax that included incentives for earning. An adviser to the British Labour Party in the 1960s and â70s (an era of higher taxes and a more centralized control of the economy), Mirrlees started his work with the assumption that the government should take money from the rich and give it to the poor.
His conclusions were surprising. Working from this assumption and making further assumptions about peopleâs skills and the effect that tax rates have on the incentive to earn, Mirrlees computed the top marginal tax rate for high-income earners. He found that this optimal rate was not 83 percent, the top rate in Britain at the time, but instead only 20 percent. Moreover, he concluded that the marginal tax rate should be about 20 percent for everyone, which would make the optimal structure something very close to what is now called a flat tax rate. âI must confess,â wrote Mirrlees, âthat I had expected the rigorous analysis of income taxation in the utilitarian manner to provide arguments for high tax rates. It has not done so.â Mirrlees was knighted in 1998.
