Public Policy in a Principal-Agent Framework

Michael Bergman and Jan-Erik Lane

Journal of Theoretical Politics, 1990, vol. 2, issue 3, 339-352

Abstract: The principal-agent framework is a rapidly developing approach to the analysis of contractual relationships within the private sector. We argue that it should be a promising approach to the analysis of public policy commitments as well. As a matter of fact, it allows the statement of a number of basic public policy problems in terms of an integrated framework. The making and implementation of public policy involve fundamental contractual problems referred to as asymmetric information, moral hazard, bounded rationality and adverse selection. The Niskanen bureau model is a principal-agent model, but its general result is much more limited than previously recognized, which may be shown by employing the same mathematical structure as Niskanen himself uses.

Keywords: principal-agent relationship; principal-agent approach; Niskanen's bureaucracy model; collective action problems; fiscal illusions; optimal public policy; public goods; monitoring public policy agents (search for similar items in EconPapers)
Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jothpo:v:2:y:1990:i:3:p:339-352

DOI: 10.1177/0951692890002003005

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