Nobel Prize Winner Sir James Mirrlees has a shocking advice for Romania. In an interview for caleaeuropeana.ro, at VI Astana Forum, Mirrlees says that the radical solution is getting out of European Union.
Q: You are famous for the taxation in the public sector and there is quite a debate going about tax evasion, how to make sure everybody pays it. Tax system are constructed in a way that people feel that maybe they should look for a way to avoid them. How do you see this discussion? That everybody should pay taxes? What are the possible methods to direct the money to the state?
James Mirrlees: When the people were saying less of the flat tax were actually meaning less of the Lord tax, it doesn’t make any particular sense to do that, unless you can somehow show that you don’t need so much tax revenue. The taxing has nothing to do with the people being able or trying to escape the taxing. There’s no particular reason why a single income tax rate would reduce somehow the evasion rate and magically increase the revenue it can get. I am not saying there isn’t truth in the claim but starting from very high rates and the reducing this rates, it would be expected to increase the tax revenue rather than reduce it, it can happen. It may have happened in America at the point they would come from increasing them over night and then making them lower. And it very exciting in France where they announced 70% which is an effective tax rate leading a number of big names to leave. In a sense, you could say that they are encouraging tax avoidance, you could say it is taxing emigration which is legitimate but they could also decide to retire, and that is a different thing. The dimension of money, profit really does exist and the most important I think is actual evasion. On the other hand, of course, a lot of the evasion would be focused to Switzerland that is sensitive and other countries blame Switzerland.
Q: Which do you think is the biggest problem now? The fact that national governments are trying to get more money from taxation or the fact that the government sometimes doesn’t administrate properly the money given from the nation? Romania is fighting with fiscal evasion everyday, and the efficiency is not that obvious.
James Mirrlees: You are talking now about the efficiency of the government expenses , not in pursuing tax payers, but maybe in building hospitals or persuading teachers to turn up at school. I feel sometimes that people can be unfair to governments because the governments are having to deal with some of the areas where it’s hardest to achieve efficiency. The fact that the government does something that we call profit constraint, they have to do their best to make a profit, and cuts costs. It has to be a product at the end, there is a kind of trade, but it is different from country to country. We have an audit office in the European Union and it looks at particular areas of government spending from time to time and tries to asses what they have done and they do a very great job, rather few people do it.
In Europe, I have observed that normally, the auditors, the accounts are more or less refused to prove them because they say there are a lot ways in which the money can be badly used, and people are cheating. Parliaments can’t do anything about that. So that is not a very good example – having an audit office does not necessarily bring improvements. But we have a long term effect, one of the reasons why many countries in the EU are becoming a bit popular ( I am very concerned about that in the British case) is because of the evidence of inefficient spending and corruption. The Germans are thinking that they want to force governments to cut spending and perhaps increase taxation, even in circumstances like the ones now. More spending is needed in order to get the economy moving. And I can understand it, they use the argument of inefficiency, they look at Greece and say it has too many civil servants, and maybe they look at Romania and say that they do to, because it is a very good idea to find ways of getting rid of the unnecessary. And now look at the unemployment.
Q: In Romania, at the beggining of the crisis, Romanian government decided to cut slaries with 25%, and then decided to increase the value-added tax from 19 to 25% in the same period. And then the government changed and the left wing decided to cut investment funds from the budget because they wanted to give the money and the salaries back to the people. So the situation isn’ looking good, we are waiting for the European funds, but we have a low absorbtion rate.
James Mirrlees: Your roots are falling to pieces, you can’t repair the roots, the power station. These conditions reflect Germany’s wish that everybody cuts which is saying that they only care about the fiscal spending of the countries and trying to reduce the chance of default as much as possible and not concerned about the problems such as unemployment. People see no good results and see that this is worse than it was before. Some things need to be done, not now.
Q: What would you advise to do at the moment?
James Mirrlees: You can start thinking about how you change things but it is difficult to give an advice because you are in quite tight bite. The radical answer would be to get out of the European Union.
Q: Do you think this would be best for Romania now?
James Mirrlees: I think that would easen the shock better. So in order to be possible to do some of these things like spending more on roads, for example, or managing it with less tax increasing, because you need more money to do it and you can’t do that because the money supplies is controlled by other bank. So this is a much better way to adjusting the cost of labor. It is going to devalue more than by reducing them and you don’t have to reduce then the wages for the civil servants. So you are now able to expand and increase employment. But I have difficulty in thinking of the things you could withing the straight jackets of the euro-system.
Q: It would be a political solution to an economic problem?
James Mirrlees: The euro is a political issue, yes. The cost of having the euro is very considerable.
Q: There are some countries which have faced the question of maybe leaving the euro-zone, such as Greece. Should they do it?
James Mirrlees: We can’t claim that this completely solves the problems that arise from property crash in Spain, of the government deficits in Greece. I can think of other solution like in Germany, having increasing government spending and a lot of inflation so the price of the German merchandise would rise and they will pay for exports from Romania and Greece more that could rise to exports from Germany.
Sir James Alexander Mirrlees is a Scottish economist and winner of the 1996 Nobel Memorial Prize in Economic Sciences. He was knighted in 1998.
Born in Minnigaff, Kirkcudbrightshire, Mirrlees was educated at the University of Edinburgh (MA in Mathematics and Natural Philosophy in 1957) and Trinity College, Cambridge (Mathematical Tripos and PhD in 1964 with thesis title Optimum planning for a dynamic economy), where he was a very active student debater.
During his time at Oxford he published papers on economic models for which he would eventually be awarded his Nobel Prize. They centred on situations in which economic information is asymmetrical or incomplete, determining the extent to which they should affect the optimal rate of saving in an economy. Among other results, they demonstrated the principles of “moral hazard” and “optimal income taxation” discussed in the books of William Vickrey. The methodology has since become the standard in the field.
Mirrlees and Vickrey shared the 1996 Nobel Prize for Economics “for their fundamental contributions to the economic theory of incentives under asymmetric information”.
Svyatoslav Anatolyevich Timashev. Collective Nobel Peace Prize 2007 – Honored Scientist of the Russian Federation
Svyatoslav A. Timashev is a member of the Interstate Council on the issue of “heavy reliability pipelines”, a member of the Scientific Council and the Dissertation Council, the American Society of Mechanical Engineers (ASME), the editorial boards of domestic and foreign journals and a founding member of the International Association for design reliability and safety.
Svyatoslav A. Timashev, a Russian citizen, was awarded a collective Nobel Peace Prize for developing methods of CO2 sequestration from the earth’s atmosphere and its disposal, together with a group of scientists of the Intergovernmental Panel on Climate Change, who together formed the International Meteorological Organization and the United Nations Department of Environmental Protection in 2007.
For his achievements, Svyatoslav Anatolyevich was awarded the VSNTO (All-Soviet Union Council of Technical Society) (1969), the medal “For Valorous Labour” (1970), the Expert Public Education Badge (1984), a COMADEM Magazine prize for the best publication in 2000, and was dubbed Knight of Justice – Commander of the Sovereign Order of the Orthodox Hospitaller Knights of St. John of Jerusalem.
S.A. Timashev shaped a new direction in the theory of reliability of large mechanical systems, solved the problem of optimization of the critical systems operation in multi-level governance class. He is the holder of nine copyright patents and author of more than 250 publications, including 19 monographs.
Svyatoslav Anatolyevich created software systems for the optimal management of the operation of oil and gas pipelines, three generations of industrial electronic systems of vibration protection, vibration diagnostics, tribodiagnostics and monitoring of energy machinery and equipment and is the founder of a new section in the theory of reliability monitoring.
He developed the scientific bases of the theory and a fundamentally new method for optimizing the operation of a complex object by the criteria of reliability and safety, as problems of multilevel governance of stochastic processes of degradation and recovery. These systems are used successfully in the Russian oil and gas industry, aviation, heavy engineering, metallurgy and other industries, as well as in university educational laboratories.
All these works have received wide domestic and international recognition, as evidenced by the election of S.A. Timashev as a member of the RF Academy of Quality Problems, a member of the Washington Academy of Sciences (USA) and the Fulbright Academy of Science and Technology (USA).
On July 26 the laureate S.A. Timashev celebrates his 79th birthday and the 58th anniversary of the start of science teaching career. He was born in Harbin, northeastern China, one of the main transit points for trade with Russia. He graduated with distinction from the Ural Federal University (formerly the Ural Polytechnic Institute).
From 1987 to the present time Professor Timashev has been the head of the Reliability Laboratory of the Engineering Complex Problem Division at IMET UNC AN SSSR. He is also Director and Academic Advisor at the Science and Engineering Center “Reliability and service life of large systems of machines” at UNC AN SSSR.
VIDEO Astana Economic Forum. Interview with Eric Maskin: Kazakhstan can be a force for modernization in the Eurasian region
Interview taken by Razvan Buzatu, from www.caleaeuropeana.ro, with Professor Eric Maskin, PhD, Nobel Laureate for Economics, Adams University Professor at Harvard University.
He is renown at international level for laying the foundation of mechanism design theory. During his career, he contributed to game theory, contract theory, social choice theory, political economy as well as other areas of economics.
Razvan Buzatu: Professor Maskin, thank you very much for accepting this discussion for Calea Europeana. First of all: why Astana?
Eric Maskin: Well Astana is now holding one of the big economic forums in the world so it’s a natural place for people who are interested in issues of our time to meet. So, I’m glad to be one of the many participants.
RB: Well, Astana these three or four days is becoming the center of the world, right, and speaking about economics and how the world works at this moment, how do you see Kazakhstan involved in the global economy?
EM: Kazakhstan has an interesting position economically and geographically. It’s close enough to Europe so that it has close ties there, but it’s also close to the Far East and given its pivotal location we can expect great things from Kazakhstan in the future.
RB: Do you think that it can play a regional role in the Eurasian region?
EM: I hope it does. Kazakhstan seems to be forward looking, progressive country and I think it can be a force for modernization in the Eurasian region.
RB: Professor Maskin you’ve designed a well known design mechanism theory, and I was wondering if you can share with us a little bit of your thoughts on how can design mechanism theory, involving also Kazakhstan, can have positive implications on the European Union economy and Eurasian economy.
EM: Well, mechanism design theory is all about how do you create the institutions for aligning incentives. Of course, each country has its own goals which are not necessarily exactly in alignment with other countries’ goals and it is the function of international institutions to reconcile possible conflicts, this could be done through international organizations, through treaties, through political unification, but mechanism design teaches us that is not enough to, say, write a treaty, say, to promote trade, but the treaty has to be written with care to make sure that all the countries who are going to be signing this treaty actually benefit from it and that may involve a series of concessions on both sides, concessions about giving something up but the benefits from conceding is that now you have an international institution which enables you to take more from other countries.
RB: Very interesting, I was talking a little bit earlier with the Deputy Director General of the World Trade Organization, and he said that the new Bali Package that they established in December last year was a negotiation and was a break through, it was basically a new step forward for the WTO in terms of negotiating between India and China and also Cuba and USA, and also USA and India, so they reached to some sort of an agreement, some sort of compromise so that they can benefit economically; in this sense it resembles a lot with the design mechanism theory.
EM: It does in deed and in fact I think that the principles from the theory have now permeated people’s conciseness enough so that when these treaties are hammered out mechanism design theory plays a role.
RB: I will go now to the other side of the world: I believe you know very well what happened in Ukraine at the end of last year and the begging of this year. How do you see mechanism design theory, using mechanism design theory, in establishing a balance in the actors that are involved and are interested in what the path of Ukraine will be in the future.
EM: That’s a very difficult question, if I knew how to solve the problem of Ukraine I would be able to perform miracles so I don’t have any magic bullets for solving the Ukraine problem. All I can say is that we know from theory that the answer to conflicts is not typically the way of isolation and I would be worried if as a result of the tension in the Ukraine, if Russia for example became more isolated from the rest of the world and from Europe in particular to the extent that the countries continue to communicate with one another, continue to trade with one another, continue to cooperate with one another, that’s the way that the international tensions are resolved. Breaking of communication, breaking of trade I’m afraid that’s the risk of heightening tensions even further so I very much hope that the isolation doesn’t occur.
RB: Thank you very much. The theory is that the trade, at the trade level, in the Ukraine nothing has stopped but at the political level there are tensions. How do you see these things going hand in hand because some of them said “listen, it’s a real crisis” and at the trade level they say “we know it’s a crisis but we are still functioning”.
EM: “still functioning” for the time being. I think that unless they improve politically there is bound to be an economic cost in a longer term. Eventually, there can be lags either way. Economics lead politics or the other way around but not indefinitely, ultimately the two go together.
RB: Can we use the game theory and the Nash equilibrium with your theory, integrated? Is that possible?
EM: Well in fact, my theory, mechanism design, is part of game theory and uses game theoretic tools like Nash equilibrium as part of its analysis.
RB: And do you think they should be used integrated?
RB: How do you think we can do that?
EM: How can we apply them to…
RB: a certain event around the world, any kind of event?
RB: Use the 3 theories integrated to find a possible solution, not the solution, to an event in the world.
EM: Well, the first thing is to try to make precise what the goals of each of the parties are, but to recognize that there will always be some uncertainty about that. In games theoretic term these are games of incomplete information “I may know my goals, but I will never know your goals completely so I have to recognize that I’m operating in a situation of uncertainty. But game theory has developed tools to study interactions under uncertainty. On top of that, one way of resolving uncertainty is through a mechanism which is just an institution for international interaction. So that I think is the integration that you are calling for. Looking at the initial situation which involves a conflict of interests which is not completely understood because of the incomplete information, but layering on top of that an international mechanism, a treaty, for example or a trade agreement which brings the various parties closer together in agreement in their interests.
RB: One last question if I may? Do you see the European Union as a global actor? Like becoming the United States of Europe?
EM: I hope it will move in that direction. The European Union has successfully integrated some of its economic policy, namely the monetary side, if it can work on its other side of economic policy, namely the fiscal policy, and integrate that, I think it has a chance of having a comparable force with the USA on the global scene, but without that kind of fiscal integration I’m afraid that it will never quite have its act together.
RB: Well professor Maskin, thank you very much for taking the time to talk to us. I’m Razvan Buzatu, for Calea Europeana, from Astana.
“Journalism education: from theory to practice” – I International Summit of Journalism “G-Global: World of the XXI century”
In the course of the VII Astana Economic Forum and the II World Anti-Crisis Conference “Eurasian Economic Club of Scientists” Association and “Success K” media agencyorganized a panel session on “Journalism education: from theory to practice” as part of the I International Summit of Journalism “G-Global: World of the XXI century”.
The session discussed the issues of how to organize cooperation between journalists and experts in other fields such as IT, statistics, graphic and interactive design in education, and how to transfer this experience in journalism.
The event was attended by Co-Director of National Security Journalism Initiative & Medill School of Journalism, Northwestern University, Timothy McNulty; Director General of the Channel 7, Aziza Shuzeeva; Professor, Head of the Media Communication and history of Kazakhstan Department,Aygul Niyazgulova; Managing editor of Caspian Publishing House, Charles Van Der Liu; Director of the media school at “Kazmedia center”, Dana Rysmuhamedova; Editor-in-chief, “Finanz und Wirtschaft”, Martin Gollmer; Director of Radio “Astana”,Gulmira Karakozov. The session was moderated by the Chairman of the Board RTRC “Kazakhstan” Nurjan Mukhamedzhanova.
Most people think that it is not necessary to get a special education to become a journalist. As in case that no one will be able to do the surgery except a surgeon, no one can know better the professional tricks of historian, economist, lawyer and journalist, – shared an opinion Gulmira Karakozov, Director of Radio “Astana”, in the course of the session. Therefore, I strongly against this majority opinion. In 2005, Kazakhstan had 19 high school faculties, branches and departments that prepared professionals in journalism, and half of them belonged to the philological and historical faculties. I would like to say, the capability of journalists who were trained by linguists or historians, and taught in accordance with tutorials on journalism will not be high. This is a stumbling block in the preparation of professional journalists. Students must be taught by a person who has experience practicing in the field of journalism, – she stressed.
Recall, a purpose of the I International Summit of Journalism “G-Global: World of the XXI century” was creation of an information platform for interaction of economics, global journalism and latest technologies.
First, in Astana well-known media persons, bright bloggers, leaders and representatives of the world’s largest media holdings, website developers, website editors, newspapers and magazines editors, scientists, who demonstrate their achievements in the media, media tools and technologies, tried and tested skills in building information business and economic knowledge in the field of journalism brought together.
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