Wednesday, October 12, 2022

Principal-Agent Problem is Fake News

Selection effect: if the imperfect way your agent carries out your wishes isn't good enough, you fire them and don't have an agent

Selection effect: if you gain more than wages+imperfection out of the deal, then you don't have a problem. Cost < benefit = good trade.

Also, you may note, it's quite rare to disobey your boss. Revenge is Sour: if you can fire your agent, you don't have to fire your agent. You can politely suggest an improvement, and if it's at all practical, it will occur. 


If you have a principal-agent problem, you aren't the principal and that isn't your agent. He who pays the piper calls the tune: you have a lies are bad mmmkay problem. 

You can't revoke their wages because you aren't paying them. They're your agent because someone has put a gun to your head and has forced you to say they're your agent, as a smokescreen. Muddying the waters, trying to conceal their criminal activities. 

Works quite well, usually.

3 comments:

charlie said...

*principal

Alrenous said...

Fuck me.

Fixed.

Dividualist said...

Most of the time people they they have a PAP, they aren't. Shareholders saying the CEO is not perfect. However most shareholders would do a way worse job than the CEO. Thus it is a good trade. They are just bitching that it is not a perfect trade.