Principal-Agent Analysis In Administration

Compare to the great performance achieved in economic system reform, the problems of time-lag in political system reform and low-efficiency in public administration have been bothering us. There still exists corruption, collusion, illegal administration in our political system. By reinforcement in legal system's build-up and moral constraint, these problems are still not thoroughly cleared. This article will try to introduce the theory of Principle-Agent in Economics to solve these problems by means of compatible incentive.From public administration, course of the whole people who holding the state power are too enormous in their number and scale to allow them execute the public power directly, central government and local governments act as initial principal(also be first-class agent) and medium agent(also be medium principal) actually. So the relationship of Principle-Agent occurs in public administration. This article will firstly introduce the theory of Principle-Agent in Economics and put forward its general mathematical model. Secondly, it will describe the Principle-Agent structure in current political system, analyze how public power function in this system when symmetrical and asymmetrical information offered. On the basis of structure and function analysis, we will find out the relationships between initial principal and administrative agent, economical agent and administrative agent to discuss the occurrence of agency problem in administration and some typical problem behaviors of agent such as moral hazard, adverse selection,collusion. Thirdly, by analyzing the cost of these problem behaviors, we will put forward the way to solve these problems. Undoubtedly, we should put emphasis on constraint system, at the same time, the compatible incentive way should be in operation. As a following, the article gives the mathematical model for compatible incentive and discuss the relative incentive and persuasive way in detail. At last, by comparing with the premise difference between economical Principle-Agent and political Principle-Agent, analyzing the paradox which the economical Principle-Agent applied in political domain, the article proposes to solve the agency problem in administration by developing a reasonable incentive-constraint system.