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.  

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VIDEO:

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”.

maskin2EM: “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?

EM: Absolutely!

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.

 

 

 

 

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One Response to VIDEO Astana Economic Forum. Interview with Eric Maskin: Kazakhstan can be a force for modernization in the Eurasian region

  1. Pingback: Calea Europeană, Partener Media OFICIAL al Forumului Economic de la Astana 2014. Jurnalul evenimentelor | caleaeuropeana.ro

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