Briton and Canadian share 1996 Nobel prize

TWO financial gurus whose work set the 20th-century agenda for matching social responsibility with incentives and whose work has been crucial for global tax policies were awarded the 1996 Nobel Economic Prize yesterday.

A Briton, Prof James Mirrlees (50), of Cambridge University, and Prof William Vickrey (82), a Canadian, won the prize for their fundamental contribution to "the economic theory of incentives under asymmetric information

Assymetric information occurs when decision-makers have different information but have to make decisions based on that information.

The Royal Swedish Academy of Sciences, which awards the prize on behalf of the country's Central Bank, the Riksbank, said their work centred on one of the liveliest areas of economic research.

The two men focused on how governments, companies or any organisation could cope with constantly lacking complete information but having to make strategic decisions.

Prof Vickrey originally became known for his work on income taxation, rewriting the 19th-century philosophy that all differences in income should be neutralised by taxation, implying strongly progressive tax rates.

In the 1940s he said progressive taxation affected individuals' incentive to work and he reformulated the problem so that individuals' productivity should not be penalised by tax schedules.

Some 25 years later Prof Mirrlees mastered the mathematical complications of Vickrey's work, applying it to many other areas of economic theory.

The two men's work has had a major bearing on the financing of public services. Prof Vickrey carried out a study of the New York subway fare system in the 1950s that made him stand out from most economists, who stick to theory rather than practice, the academy added.