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Principal–agent problem
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==Bureaucracy and public administration== In the context of public administration, the principal–agent problem can be seen in such a way where public administration and bureaucrats are the agents and politicians and ministers are the principal authorities.<ref>Potucek, M. (2017). ''Public Policy: A Comprehensive Introduction''. Prague: Karolinum Press, Charles University</ref> Ministers in the government usually command by framing policies and direct the bureaucrats to implement the public policies. However, there can be various principal-agent problems in the scenario such as misaligned intentions, information asymmetry, adverse selection, shirking, and slippage. There are various situations where the ambitions and goals of the principals and agents may diverge. For example, politicians and the government may want public administration to implement a welfare policy program but the bureaucrats may have other interests as well such as rent-seeking. This results in a lack of implementation of public policies, hence the wastage of economic resources. This can also lead to the problem of shirking which is characterized as avoidance of performing a defined responsibility by the agent. The information asymmetry problem occurs in a scenario where one of the two people has more or less information than the other. In the context of public administration, bureaucrats have an information advantage over the government and ministers as the former work at the ground level and have more knowledge about the dynamic and changing situation. Due to this government may frame policies that are not based on complete information and therefore problems in the implementation of public policies may occur. This can also lead to the problem of slippage which is defined as a myth where the principal sees that agents are working according to the pre-defined responsibilities but that might not be the reality.<ref>Lane, J. E., & Kivistö, J. (2008). "Interests, Information, and Incentives in Higher Education: Principal–Agent Theory and Its Potential Applications to the Study of Higher Education Governance". ''Higher Education: Handbook of Theory and Research''.</ref> The problem of adverse selection is related to the selection of agents to fulfill particular responsibilities but they might deviate from doing so. The prime cause behind this is the incomplete information available at the desk of selecting authorities (principal) about the agents they selected.<ref>Garba, et al. (2020). "Government Higher Education Institutions Relationship Vide the Lens of the Principal–Agent Theory". The 27th International Business Information Management Association Conference (pp. 1–11). Milan: International Business Information Management Association.</ref> For example, the Ministry of Road and Transport Highways hired a private company to complete one of its road projects, however, it was later found that the company assigned to complete road projects lacked technical know-how and had management issues. The principal-agent problem in the public sector arises when there is a disconnect between politicians and public servants and their goals and interests. Other reasons that this occurs is because of political interference, bureaucratic resistance and public accountability. Political interference happens when the politicians try and influence the decisions of public servants or bureaucrats to try and push their own interests which ultimately leads to policies being warped.<ref name="Wood">{{cite book | last=Wood | first=B. Dan | title=Agency Theory and the Bureaucracy | publisher=Oxford University Press | date=2010-10-14 | doi=10.1093/oxfordhb/9780199238958.003.0008 | url=https://www.researchgate.net/publication/261633515}}</ref> Bureaucratic Resistance is when public servants are hesitant to implement the policies that have been proposed or agreed on, which ultimately causes policies to be implemented at a slow rate. Bureaucratic resistance may be due to lack of funding, resources or political support.<ref name="Wood"/> Public accountability also plays a role in how the principal-agent theory impacts the public sector. When sworn in, politicians and public servants are responsible for ensure that they act in the interest of the public that they represent or work for, however, due to budget and resourcing issues as well as lack of transparency trust in the public sector often falls and a major disconnect grows.<ref name="Wood"/>
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