Politics And The Agency Problem

How do we get people to represent us and our interests? This is a longstanding problem and it is at the root of many of the issues of societies and institutions. It is clear that for agents to do the work of representing our interests that they need to be rewarded for this, but how to align their efforts with our interests has remained a persistent difficulty in all kinds of situations in life. Without attempting to solve this problem, I wish to point out how people attempt to do so.

At work for the past nine years I have had to deal a lot with insurance agents. The name of their job suggests that they are in fact agents, and if one looks at the agency issue, they are agents for two separate parties simultaneously. They are agents of people looking for insurance, but also agents of the insurance companies that contract them who are looking for sales. And both sides have the issue of getting the agent to align with their goals. The goal of a customer is to get insurance to lower the cost and the risk of high cost for health issues. The goal of an insurance company is to sell insurance that will earn them the most money. How both goals are to be solved simultaneously accounts for the design of pay structures and communications between agents and customers and the underwriting of insurance and so on.

When we get to politics, politicians often fail to understand that they are agents of the people. People tend to think of politicians as being authorities and leaders, but they are also agents, agents of the people whom they represent. Let us note that they are not merely the agents of those who voted for them, but of all the people in their district, state, or country, even those who did not vote for them. They are duty bound to seek the well-being of everyone they are accountable to, and this is all too easily forgotten when they enter office as people of modest wealth and after a few years find themselves to have many millions of dollars that simply are not accounted for, adopting worldviews that look down on the homely and provincial voters back home, and espouse the interests of a corrupt elite. Such people deserve to be tossed out, as many times as it takes to get the point across, but the very existence of this problem indicates that there is a fundamental agency problem at work when it comes to politics. How is it that people make sure that their elected leaders align with their interests?

Let us ponder how it is that politicians are made to align with the interests of various parties. Companies hire lobbyists and provide insider trading information to politicians and their families that allow for politicians to gain large amounts of money in a quick fashion that also align those politicians with the interests of the various industries and bureaucracies that they serve. In the meanwhile, the salaries that these purported public servants have is modest, and far outweighed by the other money that politicians are receiving as a result of the corruption of political office. The people have no carrot that can compete with the bribes and appeal of Washington DC and its scene. What the people do have is a stick that can and should be wielded against those who forget whom they serve. And perhaps that needs to be used far more commonly than it is.

About nathanalbright

I'm a person with diverse interests who loves to read. If you want to know something about me, just ask.
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