The Principal–Agent Approach and Public Administration

Abstract

In the years since Ross published the article “The Economic Theory of Agency: The Principal’s Problem” in 1973, many publications have established the principal–agent framework as an interesting paradigm for the analysis of incentives in contracting, both short-term and long-term. The practice of public administration can be conceptualized from a principal–agent approach. New light can be shed on established arguments in the discipline of public administration by the key concepts of principal–agent interaction. In this context principal is used to describe the government responsible for legislation and policymaking in well-ordered societies, whereas the set of agents includes all organizations and people engaged in policy implementation: traditional departments, bureaus, public trading departments/public enterprises (using the vocabulary of New Public Management (NPM)), executive agencies, boards, quangos, and public joint stock corporations.