Talk:Principal–agent problem

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Only tangentially related to 'state monopoly capital'

This page currently appears as part of the "state monopoly capital theory". The State monopoly capital page states the concept arose from Marxist theory by Lenin, Stalin, and Trotsky, the last of whom died in 1953. The originators of the idea of the principal-agent problem, according to this page are Stephen Ross (economist), Barry Mitnick, Michael C. Jensen, and William Meckling, writing in the 1970s. These are American corporate finance academics. Ross has awards from Morgan Stanley and Deutsche Bank. These are nor Marxists, and the principal-agent problem is not a Marxist theory. — Preceding unsigned comment added by 81.154.149.218 (talk) 09:13, 22 January 2022 (UTC)

Adding to the concerns raised in this reply, no connection with "state monopoly" is made anywhere in the article, either. Thus it seems like a stretch to try and connect it to "state monopoly." 159.121.206.8 (talk) 18:18, 14 December 2022 (UTC)

I agree that placement of the article as part of "State monopoly capital theory" makes no sense. Indeed, although an article on "principal-agent problem" is appropriate (there is also an article on "agency cost," for example), the major article should be on the actual core approach, the "theory of agency." Other corrections, which I would like to make: Mitnick is not a corporate finance academic; he was trained in political science but works on organization theory and business-society relationships in a business school. His work on agency was not corporate finance; it was a general theory of agent-principal relationships in society. There is no dispute on who originated agency theory; the article is incorrect, and one of the sources cited, Eisenhardt (1989), although insightful on many points, is simply incorrect in its presentation on the origin. Agency theory was originated by Mitnick (institutional/organizational) and by Ross (economic), independently (see Ross, 1973, 1974; Mitnick, 1973, 1974, 1975). The works cited support this. It is also important to cite Berhold (1971), who used agency terms but his article was in the sharecropping/incentive contracting literatures in that the problem was how to share profit as incentive in order to "motivate the appropriate decision... relating monetary payments ... to a characteristic of the agent's performance." (p. 461). The nature, dimensions, and dynamics of an actual agency relationship and the need for and means by which a descriptive theory of agency may be constructed are missing from his analysis. The fact that Berhold used agency terms was not unique; scholars had earlier used such terms, including Cooper in accounting, Arrow in economics, Downs in political economy, and Pitkin in political philosophy. The key aspect was whether an actual, explicit descriptive theory of agency relationships and behaviors was proposed and begun. Despite authoring the most influential work on agency theory, Jensen and Meckling (1976) never claimed to originate agency theory (see their footnote 7); they originated an agency approach to the theory of the firm. The "ice cream cone" problem mentioned in the article, which was told by Ross to Mitnick, was meant as a humorous illustration of a critical issue as seen by Ross, not some grand explanation of Ross's approach, though it expressed his frustration at fundamental limitations of modeling within the assumptions he used. It looks out of place as an attempt at explanation. The following additional sources should be cited regarding the origin of agency theory:

Berhold, M. 1971. A theory of linear profit-sharing incentives. Quarterly Journal of Economics, 85: 460–482.

Mitnick, B. M. 1973. Fiduciary rationality and public policy: The theory of agency and some consequences. Annual Meeting of the American Political Science Association, New Orleans, LA. In Proceedings of the American Political Science Association, 1973, Available at SSRN: https://ssrn.com/abstract+1020859 or http://dx.doi.org/10.2139/ssrn.1020859

Mitnick, B. M. 1974. The theory of agency: The concept of fiduciary rationality and some consequences. (Unpublished doctoral dissertation). Department of Political Science, University of Pennsylvania, PA. ProQuest Dissertations Publishing,  1974. 7422881.

Mitnick, B. M. 1975. The theory of agency: The policing “paradox” and regulatory behavior. Public Choice, 24: 27–42. Available at SSRN: https://ssrn.com/ abstract=1021143 [First non-proceedings article in the social science literature proposing and extending agency theory].

Mitnick, B. M. 2019, 2006. Origin of the theory of agency: An account by one of the theory’s originators. Retrieved from https://ssrn.com/abstract=1020378

Mitnick, B. M. 2021. Guidepost: The theory of agency redux. Academy of Management Discoveries, 7(2):171-179.

Ross, S. A. 1973. The economic theory of agency: The principal’s problem. American Economic Review, 62: 134–139.

Ross, S. A. 1974. On the economic theory of agency and the principle of similarity. In M. Balch, D. McFadden, & S. Wu (Eds.), Essays on economic behavior under uncertainty: 215–237. New York, NY: Elsevier. Agencyedit (talk) 17:15, 9 May 2024 (UTC)

Overly elaborate examples of PA problems

Does the page really need very elaborate and detailed (paragraphs in plural) examples of PA problems across all kinds of relationships? While specific examples of PA problems across different issue areas is helpful to readers, I feel the article is borderline-unreadable in its current form with all the highly repetitious and redundant details on how basically the same dynamics manifest across issue areas. Thenightaway (talk) 18:42, 18 April 2023 (UTC)

Semi-protected edit request on 23 April 2023

I would like to ass a small section under the Subjective heading regarding one of the risks of using it to pay employees.

Employers may also have personal bias when subjectively analysing employee performance. Whether deliberate or not an employers relationship can alter their perception of how an employee is performing subjectively. An employee with a poor relationship with their supervisor may be continually under-rated by the supervisor in performance-reviews. This bias may also present itself in the form of discrimination of minority groups as supervisors may view their work as ‘lower quality’ because of who they are and not what they do.

My source: Lee, Audrey J. "Unconscious Bias Theory in Employment Discrimination Litigation." Harvard Civil Rights-Civil Liberties Law Review, vol. 40, no. 2, Summer 2005, pp. 481-504. HeinOnline, https://heinonline-org.ezproxy.library.uq.edu.au/HOL/P?h=hein.journals/hcrcl40&i=487. LeeV101 (talk) 23:55, 23 April 2023 (UTC)

 Not done: it's not clear what changes you want to be made. Please mention the specific changes in a "change X to Y" format and provide a reliable source if appropriate. AnnaMankad (talk) 06:41, 17 May 2023 (UTC)

Expert needed (and citation style)

There are a lot of parenthetical citations throughout the text with no corresponding references section. It will likely take somebody with extensive knowledge of the published literature to find the proper article cites. voorts (talk/contributions) 04:46, 16 May 2023 (UTC)