The Mirrlees Approach to the Theory of Economic Policy

This paper summarizes James Mirrlees' key contribution to the theory of tax policy. It argues that the Mirrlees approach of viewing government as being constrained by imperfect information has changed profoundly how we look at the normative public policy. In this view, asymmetric information provides the limit to redistribution by restricting the efficiency-equity trade-off. It leads to consideration of other policy instruments for relaxing incentive constraints and improving the efficiency of redistributive policies. Some of these instruments include quantity controls, in-kind transfers and public provision or mandating of insurance, things we observe in practice. Copyright Kluwer Academic Publishers 1998