Tuesday, November 1, 2016

Literature Review 3

Mitnick, Barry M. "Re: Origin of the Theory of Agency." Re: Origin of the Theory of Agency. University of Pittsburgh, Jan. 2006. Web. 18 Oct. 2016.

The majority of the article is spent by Mitnick embellishing his work and making sure the reader understand that he (and his college, but mostly himself)  founded the concept of the 'principal - problem.' Mitnick does however, get to the point where he eventually explains what it is. Fundamentally, the principal agent problem is when one party, the principal is attempting to get another party, the agent to accomplish a task for the principal as efficiently as possible. 

Barry Mitnick is a Professor of Business Administration and Professor of Public and International Affairs at the Katz School of Business and  was one of the originators of the theory of agency (1973), including its name, and is responsible for one of its key logics: Because the benefits from securing and assuring perfect agents often fail to exceed the perceived costs of obtaining such agents, social and organizational institutions are structured to manage the resulting dilemmas. In a series of papers with Robert C. Ryan, they are exploring various aspects of the social construction of organization systems by participants in the face of uncertainty, including how individuals and organizations judge the characters of social settings as credible, and commit to action in such settings.

The two main terms to understand in the principal agent problem and the difference the principal and the agent. The Principal is the individual or entity who is requesting the work or task to be done. The Agent is the individual or entity who will do the work.

Agency in terms of problems of compensation contracting; agency was seen, in essence, as an incentives problem.” (Mitnick)

"the problem is one of selecting a compensation system that will produce behavior by the agent consistent with the principal's preferences."

This article adds value to the paper because it directly describes and addresses the conflict that many students experience between higher education and themselves. The students in this example are the principal, and the schools and universities are the agents. While the student wants to get trained/educated as quickly as possible for as an economic price as possible, the university wants to keep the student enrolled as long as possible while charging the highest price possible.

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