How agents matter

Abstract

In spite of the growing sophistication of the principal-agent (PA) literature, it still contains a remarkably thin view of agent behavior. That is, PA theorists have made surprisingly few direct claims about agents. Almost twenty years after it was written, Williamson's (1985: 30) pithy formulation – that agents are "self-interest seeking with guile" – remains the classic statement, and most current formulations do not go far beyond it. Mainly, the field has focused on what principals can do to control such agents. These controls – including detailed rules, screening and selection, monitoring and reporting requirements, institutional checks, and sanctions, as detailed in the Introduction – give us an indirect picture of agents as seen through the eyes of principals. While the indirect picture reinforces Williamson's original notion of potentially troublesome agents, it also suggests that principals have many tools to control these agents.