Hans-Werner Sinn's Birthday Conference

Hans-Werner Sinn flanked by Nobel laureates      Sir John Mirrlees and James J. Heckman

It is difficult to say what was more impressive: the range and breadth of the conference's topics, the roster of speakers and guests, or the fact that it was simply meant to mark a birthday. It's got to be something to have your birthday celebrated with a conference hosting some 300 high-ranking guests at the old seat of the Bavarian Kings, the Munich Residence, and, just by-the-by, discuss some of the most pressing global issues of our times.

Organised by the Department of Economics at the University of Munich (LMU) and the Ifo Institute for Economic Research, the special conference to mark Hans-Werner Sinn’s 60th birthday was held on April 25, under the title “Economic Policy in the Presence of Globalisation”. Scientific organisation was provided by Monika Schitzer of LMU and Assaf Razin, of Tel Aviv University, while the conference itself was put together under the guidance of Ifo Executive Board member Meinhard Knoche.

Amongst the speakers were two Nobel laureates, Sir James Mirrlees and James J. Heckman (pictured), and such luminaries in public finance as Alan J. Auerbach, Sir Tony Atkinson, Robin Boadway, Peter Birch Sørensen, Michael Keen, John D. Wilson, Otmar Issing, Paul de Grauwe, Rick van der Ploeg, Eytan Sheshinski and Kai Konrad.

The conference reviewed, from a global perspective, such challenges as the future of the welfare state, tax competition, European integration, global climate change, and skills formation.

Alan Auerbach, from the University of California at Berkeley, examined the survival of the welfare state. Threatened by ageing population, globalisation and systems competition, the welfare state must liberalise its labour markets and reform both its tax and pension systems if it is to have any future at all. And it is difficult to survive, as Sir Tony Atkinson, from Oxford University, pointed out, if the welfare state itself does not survive. The way to go, he explained, is to choose the right combination of private and state coverage.

Robin Boadway, of Queen's University, enumerated the symptoms of an ailing welfare state (including homespun ones such as high public debt and rigid labour markets, and globalisation-prompted ones, such as increased inequality and more intense competition). His prescription for regaining good health includes reducing taxes, coaxing the uemployed to seek work and supporting income for the low-earners. The big question, when it comes to pushing these measures through, is whether the political will is there, and whether policy-makers can be steered into following the right path.

Peter Birch Sørensen, of the University of Copenhagen, contrasted two views regarding systems competition. On the one hand, some competition in taxation, just as in goods markets, would be beneficial by increasing efficiency in the public sector. On the other, if such competition leads to tax rates that are too low to finance the necessary state's outlays, inefficient resource allocation would ensue. Together with a colleague, Mr Sørensen developed a model that shows up to which point tax competition is beneficial.

Michael Keen, from the International Monetary Fund, warned against providing too many incentives to attract capital. A one-size-fits-all solution does not exist, given the varying degrees of capital mobility between nations. Co-ordinating tax policies may be useful between given countries, in other cases not.

John Wilson, of Michigan State University, pointed out the cases in which tax competition can be beneficial, such as limiting the size of the state apparatus and providing adequate taxing of foreign nationals.

Nobel laureate Sir James Mirrlees, University of Cambridge, espouses the view that the same rates should apply internationally for taxing capital, to account for its great mobility. Labour, however, should be taxed differently. He advocates greater mobility of labour, in particular within the EU.

Kai Konrad, from the Wissenschaftszentrum Berlin für Sozialforschung and the Free University of Berlin, as well as a former Ph.D. student of Hans-Werner Sinn, reviewed the roles played by his mentor: bringing innovative ideas into—and exerting great influence upon—economic thinking, and being one of the most weighty voices helping to shape economic policy.

Next it was the turn of European integration to be dissected. Otmar Issing, from the University of Frankfurt and a former member of the European Central Bank's board, stressed in his introduction the unparalleled success of Europe's economic integration. The introduction of the euro and the establishment of the European Central Bank can be regarded as the latest steps in this enormously fruitful coming together that has given rise to the largest economic area in the world. Still, he said, this European house is not yet finished: not until a deeper political integration also occurs.

While Paul de Grauwe, University of Leuven, concurs, he pointed out that, while a common currency has eliminated exchange rate crises, economic divergence between the various member countries has not diminished. One reason is that the European Central Bank watches over a common monetary policy, but wage and tax policies remain in the hands of the individual member countries. For that reason, he advocates deeper political integration and a liberalisation of the the markets.

Given the indisputable successes of the EU, it seems paradoxical that support for it is so lukewarm among its citizens, as remarked by Rick van der Ploeg, Oxford University. The rejection of the European constitution is a case in point.

Turning its attention to global climate change, the conference welcomed Eytan Sheshinski, of the Hebrew University of Jerusalem, who commented on the Stern Report on climate change and conducted a cost-benefit analysis. As he pointed out, investing 1 percent of world GDP to combat global warming, as advocated by Stern, would in the end pay off: doing nothing would reduce world GPD by close to 14% by 2200.

Hans-Werner Sinn, in turn, examined the so-called "green paradox": the fact that "green" policies could, in the end, make the planet warmer. One aspect is the neglected supply side in carbon dioxide (CO2) emissions. While most measures concentrate on reducing demand, it is clear that the amount of CO2 in the atmosphere ultimately depends on the amount of fossil fuels extracted from the ground. The current green policies will not, as formulated now, do much, if anything at all, to reduce this amount. Nudging oil producers to extract less now will not be easy. One idea is to levy a worldwide source tax on income from capital. Until the right incentives are in place, including an emissions policy that leaves no loopholes and to which all countries adhere, green policies should be complemented by the entire arsenal of technical means at our disposal to reduce carbon emissions or to remove it from the atmosphere. Afforestation, in this regard, is a powerful tool and should be encouraged.

The conference was rounded off by Nobel laureate James J. Heckman, of the University of Chicago, whose keynote speech addressed skill formation, in particular the importance of starting it in the preschool years.

Looking back on the conference, with renowned scholars having flown in from three continents, a range of politicians dropping by or sending their greetings, some of the sharpest feathers in economic journalism in attendance and a range of former students, all now in high academic positions, paying homage, it is small wonder that, at the end, Hans-Werner Sinn contentedly remarked: "It is not such a bad thing to turn sixty. In fact, I highly recommend it."

Well, was all we could say, we are working on it.

A Sinn Primer
Hans-Werner Sinn holds since 1984 the chair in Economics and Public Finance at the Department of Economics of the Ludwig Maximilian University of Munich (LMU), and is the Director of the Center for Economic Studies at the same university. In 1999, he was appointed president of the Ifo Institute for Economic Research.

Under his leadership, the ever closer cooperation between the LMU and the Ifo Institute has turned Munich into an internationally renowned centre for economic research and economic policy debate, and the focus of one of the world’s largest economic research networks.

During his career, Mr Sinn has been a prolific writer, with 7 major books clocking 32 editions in 6 languages. With a further 11 smaller books, more than 130 scientific articles and some 250 economic policy articles, it comes as no surprise that, according to the Ursprung-Zimmer study, among German economists he ranks second only to Nobel laureate Reinhard Selten in terms of citations by his peers.

A ranking of German economists published by Handelsblatt in 2006, based on cross citations of SSCI papers in SSCI journals, ranked him fourth. In the RePEc database he was the German economist most frequently quoted in academic works in 2006, and a survey by Financial Times Deutschland showed him as one of the top two economics professors who attract a large following of academic pupils.

He has been awarded many distinctions, including the Bundesverdienstkreuz (Federal Cross of Merit of the Federal Republic of Germany) and the Bavarian Order of Merit for his outstanding academic performance (see note).

• Read a report on the conference (in German, pdf, 1.1 Mb)