Can Performance Monitoring Solve the Public Services' Principal-Agent Problem?

David K Whynes

Scottish Journal of Political Economy, 1993, vol. 40, issue 4, 434-46

Abstract: The principal-agent problem emerges when agents are permitted discretion in decision-making and adopt strategies counter to principals' interests. The problem can be recognized within many public services and, in theory, can be overcome by the introduction of performance monitoring and tarqeting. Such provisions are presently being introduced into public services in the United Kingdom. However, it can be shown that both the specific nature of the output of service agencies and the form of remuneration offered to employees permits these agencies to adopt counterstrategies. In consequence, monitoring and targeting are unlikely to result in superior outcomes for the principal. Copyright 1993 by Scottish Economic Society.

Date: 1993
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Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

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