Parliamentary, Presidential, and Semi-Presidential Democracies - An unifying framework: principal-agent and delegation problems
4 important questions on Parliamentary, Presidential, and Semi-Presidential Democracies - An unifying framework: principal-agent and delegation problems
A principal-agent, or delegation problem refers to:
We can think of the outcomes produced by delegation in terms of:
- Agency loss: the difference between the actual consequence of delegation and what the consequence would have been has the agents been perfect. A perfect agent is one that does what the principle would have done, had the principle been the agent.
- Whether delegation is successful: delegation is considered successful whenever it makes the principle better off compared with the status quo.
Two particular problems arise if the agent has more information than the principal:
- Adverse selection: occurs when the agent has attributed that are hidden from the principal
- Moral hazard: occurs when the agent has the opportunity to take actions that are hidden from the principal. In the political setting, the potential for moral hazard arises whenever the principal, such as the electorate, lacks information about what the agent, such as the government, is doing.
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Moral hazard and adverse selection problems can be mitigated if the principal can gather more information about the agent. Two types of mechanisms for this are:
- Ex ante mechanism: helps principals to learn about their agents before these agents are chosen. Tends to fall into two categories:
- screening
- selection
- Ex post mechanism: used to learn about the agent's actions after they have occurred. There are two basic types of ex post mechanism:
- fire alarm system: the principals relies on information from others to learn about what the agent is doing
- police patrol system: principals monitor the actions of their agents themselves
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