James Mirrlees was born in 1936, grew up in Scotland, and went to the University of Edinburgh, where he graduated in mathematics in 1957. At Cambridge University he did Parts 2 and 3 of the Mathematical Tripos, and then a PhD in economics, finishing in 1963 with a thesis "Optimal Planning Under Uncertainty", after a year in India on an MIT project assisting the Planning Commission.
From 1963 to 1968 he was a lecturer in Cambridge, a teaching fellow of Trinity College. He worked on the theory of planning, development economics, and public finance. He began the first book with Ian Little on methods of cost-benefit analysis for developing countries, and papers, with Peter Diamond, on the theory of optimal taxation. His best known paper, on optimal income taxation, was begun while on leave at MIT in 1968. It was published in 1971.
In 1968, he went to a Chair in mathematical economics at Oxford, and became a fellow of Nuffield College. He continued to work on development (with Little), taxation (often with Diamond), growth (with Stern, Dixit and Hammond), principal/agent problems, and welfare economics.
He became Professor of Political Economy in Cambridge in 1995, from which he retired in 2003, and remains a Fellow of Trinity College there. Since 2002, he has been Distinguished Professor-at-large of The Chinese University of Hong Kong. He is also currently Distinguished Professor at the University of Macau, and Laureate Professor at Melbourne University. At various times he has been a visiting professor at MIT, Berkeley, and Yale. In 2009, he becomes Master of Morningside College, established in The Chinese University of Hong Kong.
He is a Fellow of the Econometric Society (of which he was President in 1983) of the British Academy, and the Royal Society of Edinburgh, and a Foreign Member of the US National Academy of Sciences. In 1996, he was awarded a Nobel Prize in economics, for contributions to the theory of asymmetric information. He was knighted in 1997. In 2009, he is awarded a Royal Medal by The Royal Society of Edinburgh.
How can we make the next crisis better?
The current crisis had many causes. Macroeconomic policy used the wrong criteria, and burst the speculative bubbles. Derivatives created bad incentives for bankers and other lenders, leading to bad loans and excessive leverage. Poor methods for assessing risks, and low competence analyzing them, generated vast gambles. Stimulus packages were too small and too late. Therefore governments need to reform the criteria for, and flexibility of, macroeconomic policy; they need to restrict severely the kinds of financial assets that can be traded; and find ways of improving the decisions of financial institutions, by, if possible, changing expectation about future bail-outs, and examining the risk-assessment methods used by accountants, actuaries, and rating agencies. Can governments command the competence to achieve all that?