We pick agents to act for us but these agents are independent actors with their own interests as well. In politics, if we do get the agent to act in the interest of the principal, then there is the problem that agents act solely for reelection and not actually policy outcomes.
- 1. Adverse selection problem-an agent that doesnt look out for your interests and lies
- 2. Moral hazard- when a party takes undue risks because the consequences are borne by someone else
These are all issues of assymetrical information so the solution is monitoring.