Monday, February 10, 2014

Economic Agency of Theory of Agency

     Personally, I had a lot of trouble understanding this article but what I did get out of it there is a principle (employer) and the agent (employee). It is the agents responsibility to act on behalf of the principle. I could relate this to whats happened in my life personally and in the Reindeer Industry.
      Once upon a time I got into a little bit of trouble with the law and found myself in need of a decent lawyer. I paid him to handle my case, his incentive to do well was the exploited amount I paid him, and his reputation as a good lawyer. Fortunately my needs were not hard to understand, and he was able to get me off the hook, I walked away guilt-free, and he walked away wealthier. This is an example of the Agency Theory working well.
     Once upon a time, not too long ago, several representatives (agents) from the Reindeer Herders' Association (principle) went on a little trip to Washington D.C. to educate the congressional delegates and other governmental agencies that the reindeer industry does exist, and this is what we have to offer. As much as we would like to ask for help and money, we decided now is not the best time to ask for help, but simply let them know that we are here, and we have a product to offer (reindeer meat and by-products). unfortunaetly not all the representatives acted in ways that best communicated what we wanted. They had a negative reaction to the people we considered important, and they now consider us a joke. This is an example of the Agency Theory not working well.
      In both examples hard-earned money was spent in attempt to get what I or we wanted. I had to devote my time to three jobs to pay off my lawyer, but, I am glad I did it, and would refer anyone who needed legal advice to him again. The small amount of funds that the RHA has managed to gain, was practically wasted on an educational adventure, where we didn't get to complete our purpose. There are many places in this agency theory where things can go wrong and neither party be happy with one another. It would be hard to think up ways to prevent this from happening, short of always representing yourself. Representing yourself isn't always a good idea ,if i were represent myself in court, I surely would have lost the case due to my lack of knowledge And, not possible ,I did not have the funds to send myself to Washington D.C. with the other representatives. There is the question of whether the agent is being paid enough or not, or acting in the best interests of his principle, or of himself (problem with the RHA rep) I suppose problems will always exist in our imperfect world, but maybe someday I will have enough money to solve all these problems myself.

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