Essay on Principal Agent Problem ( The Agent )

Essay on Principal Agent Problem ( The Agent )

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In the principal agent problem, a party (the agent) is appointed to act on the behalf of another party (principal), however when the incentives of both parties are not perfectly aligned, in other words, when the agent’s interests differ from the principal’s a problem becomes present. The agent would become more likely to act in his or her own interests, rather than the interests of the principal.
Principal agent problem allows us to see who has the power in certain circumstances, in which there is an individual that is in a position of power in a certain branch of the government. With the principal agent problem, we can see that, people in positions of power can use the benefits of such positions to pursue their own agendas, and use the power of the government to benefit themselves rather than benefitting the society.
An example for the principal agent problem would be, a politician who gets away with corruption, such as embezzlement, during his or her time in the office. This becomes possible because in certain situations it can turn out to be too costly for the voters to take part in actions towards removing the politician from office. In the above example, the politician would be the agent, as he is the one with power, that is given to him with the institution of voting, and he is using such power to realize his own agenda, in this case embezzlement.
Information asymmetry is a more common reasoning to why this problem occurs. Such situation arises, when the agent is more informed on a situation than the principal. This Information asymmetry can make it difficult and sometimes can even make it impossible for the principal to realize if the agent is acting in the principal’s best interest, or the agent’s best interest. This b...


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...o remove judges after the judges get put in place. Also, it is important to note that, the courts have the power of judicial review. The power of judicial review, examines actions that take place in the other branches of the government to see if they fit with the constitution, in other words check the constitutional validity of a legislative action. In the case of an executive action being called into question, the Supreme Court has the authority to abolish and invalidate it.
Last but not least, public opinion itself is also a limitation that prevents presidency to dominate US politics. Which means that the citizens of the United States, has the power to question the actions of the presidency, and if the president does not have the majority of the public’s support on his or her side, that makes it so that the president cannot carry out his or her ideals, and agenda.

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