Self-interest Of Agents Research Articles

Knaves, knights or networks: which assumption of lecturer and manager motivation should underlie further education policy?

Julian Le Grand, a well-known economist, identifies two types of public sector employee: knights (with altruistic motives) and knaves (with self-interested motives). He argues that the quasi-market, predicated on the assumption of knavish behaviour (or agent self-interest), is the most effective way of directing school managers and teachers towards improving education outputs at lower unit cost. In this article, a review of the literature on the English post-incorporation further education quasi-market is undertaken (under the Conservative government [1993–1997], New Labour [1997–2010] and the Coalition government [2010–2014]) to assess if such a premise is correct. The conclusion from the review is that an over-focus on policy, premised on agent self-interest, effects limited improvements in the quality of education outputs and needs-based equity for disadvantaged students because such policy marginalises other motivational inputs, such as intrinsic motivation, professional values and tacit knowledge from the production process. The solution, much of the FE literature suggests, is the replacement of top-down policy with democratic local governance and participative leadership as a means of encouraging intrinsically motivated tutors and managers (or knights) to meet economic and social goals through the productive potential of learning cultures (or networks).

Moral and Instrumental Norms in Food Risk Communication

The major normative recommendations in the literature on food risk communication can be summarized in the form of seven practical principles for such communication: (1) Be honest and open. (2) Disclose incentives and conflicts of interest. (3) Take all available relevant knowledge into consideration. (4) When possible, quantify risks. (5) Describe and explain uncertainties. (6) Take all the public's concerns into account. (7) Take the rights of individuals and groups seriously. We show that each of these proposed principles can be justified both in terms of more fundamental ethical principles and instrumentally in terms of the communicating agent's self-interest. The mechanisms of this concordance of justifications are discussed. It is argued that the concordance is specific for areas such as food risks in which agents such as companies and public authorities are highly dependent on the public's trust and confidence. The implications of these findings both for moral philosophy and for practical food risk communication are discussed.

Scale and Costs of Fishery Conservation

Observation and measurement of the ocean's ecosystems is demanding and costly. It makes verification of our theories difficult and forces us to engage in collective action based upon often very imperfect concepts of the dynamics of the system. Once we establish the institutions of col-lective action we adopt 'official' conceptions of system dynamics and generate expectations about how the natural system will react to our collective actions. In response individuals invest-ment in skills, knowledge, capital, technology, business plans, scientific agendas and so on. The self-interest reflected in these investments filters the amount and the quality of private information provided to the public so that it is consistent with the self-interest of agents who acquire that information. This limits and biases the private information available to managers. If the system being managed is simple (or if we think it is) and the costs of data collection minor, these impairments are not of any account (or we may think they are not); under these circumstance, a public science body should be able to gather whatever information is necessary for continuing adaptive governance. In a complex system, however, these impairments deprive the governance process of valuable information, and reduce the scope of collective action (the set of feasible rules). This creates path dependent lock-in that reduces adaptive capacity, generating, thereby, the circumstances for still another tragedy. Our way out of this dilemma rests in an understanding of the limits of our ability to predict and control natural systems. We are most able to predict a response to our actions at broad, slow moving ecological scales, e.g., a single stock of fish next year. Consequently, we gravitate towards institutional solutions that cater to that predictive ability. But these kinds of solutions impair feedback and make us vulnerable to surprises that develop over a longer period of time and at finer ecological scales. Maintaining adaptive capacity, consequently, means moving toward institutions that are less specific and longer-term, i.e., multi-scale and system based. This tends to improve feedback by reduc-ing the bias and increasing the breadth of private information provided to the public. This cannot be accomplished, however, without taking into account the constraints on the efficient flow of information within institutions/organizations. Recognizing these limita-tions is the other part of our way out. In particular, we cannot afford to base governance on a centralized organization that operates only at a broad scale; by doing so, we misalign private incentives and social objectives, incur very high enforcement costs, forfeit the ability to use a broad range of policies necessary for sustainability and, overall, create an environment in which information about the environment and the impact of our activities is very costly

The Principal's Moral Hazard: Constraints on the use of Incentives in Hierarchy

Pure incentive schemes rely on agent self-interest, rather than more coercive control, to motivate subordinates. Yet most organizations, and in particular public agencies, rely very little on pure incentive contracts. Most organizations rely on primarily coercive mechanisms of monitoring and sanctioning that many theorists have found objectionable about hierarchy. We identify a problem we denote as the principal's moral hazard constraint which can result in an inefficient reliance on monitoring and sanctioning: even when agent's behavior can be efficiently shaped by a straightforward incentives scheme, principal's self-interest may stand in way of implementing it. In these cases, bonuses large enough to produce efficient incentive effect are prohibitively expensive for principal. One way out of this trap - penalization of agent for poor performance - faces general legal restrictions in public workforce. Another - to form an ownership agreement with agent - is impossible due to ownership structure of government. This means that for a large class of control problems in agencies, and hierarchical control problems more generally, institutional designers must rely on more coercive monitoring-based mechanisms for controlling agents. While monitoring is often thought of as resulting from agent's moral hazard, it can just as reasonably be seen as resulting from principal's moral hazard.

Practical Reason and the Status of Moral Obligation

The power of skepticism depends on the apparent possibility of rationally asking, for virtually any kind of proposition commonly thought to be known,howit is known or what justifies believing it. Moral claims are among those commonly subjected to skeptical challenges and doubts, even on the part of some people who are not skeptical about ordinary claims regarding the external world. There may be even more skepticism about the possibility of justifying moralactions,particularly if they are against the agent's self-interest. Both problems-how to justify moral claims and how to justify moral action - come within the scope of the troubling question “Why be moral?” Even a brief response to moral skepticism should consider both kinds of targets of justification, cognitive and behavioural, and should indicate some important relations between the two types of skeptical challenge. I will begin with the cognitive case- with skepticism about the scope of theoretical reason in ethics - proceed to practical skepticism, which concerns the scope of practical reason, and then show how an adequate account of rationality may enable us to respond to moral skepticism.

The Principal's Moral Hazard: Constraints on the Use of Incentives in Hierarchy

Pure incentive schemes rely on the agent's self-interest, rather than more coercive control, to motivate subordinates. Yet most organizations, and in particular public agencies, rely very little on pure incentive contracts and instead use coercive mechanisms of monitoring and sanctioning that many theorists find objectionable. We use principal-agency theory to investigate the problem. Principal-agency theory has tacitly assumed throughout that it is in the principal's interests to find a set of incentives that induce efficient levels of effort from the agent. We show that this is not necessarily the case. We identify a problem we denote as “the principal's moral hazard constraint” in which bonuses large enough to produce the efficient incentive effect are prohibitively expensive for the principal. Potential solutions to this problem—involving penalization or joint ownership—are unavailable in the public sphere. This means that for a large class of control problems in agencies, the principal's self-interest will result in the inefficient use of monitoring and oversight rather than outcome-contingent incentives. Although monitoring is often thought of as resulting from the agent's moral hazard, it can just as reasonably be seen as resulting from the principal's moral hazard.

The contexts of knowing: natural history of a globally distributed team

AbstractThe focus of this paper is cognitive convergence in a globally distributed team (GDT), defined as the process by which cognitive structures of distributed team members gradually become more similar over time. To explore the convergence process, we employed a longitudinal, ethnographic research strategy that allowed us to follow a naturally occurring GDT over a 14‐month period, producing a rich case study portraying factors and processes that influence convergence. Confirming previous studies, we find that increases in shared cognition alone are not sufficient to account for performance gains on a GDT. Rather, it may be necessary not only to increase the sharing of cognition, but also to reverse a pattern of increasing divergence that can result from rejection of key knowledge domains. We also found that several factors influence the process of cognitive convergence beyond direct knowledge sharing. These include: separate but parallel or similar learning experiences in a common context; the surfacing of hidden knowledge at remote sites by third‐party mediators or knowledge brokers; and shifts in agent self‐interest that motivate collaboration and trigger the negotiation of task interdependence. Also relevant to cognitive convergence on a GDT is the geographical distribution pattern of people and resources on the ground, and the different ways in which leaders exploit the historical, cultural and linguistic dimensions of such distribution to further their own political agendas. Several propositions related to these observations are suggested. We conclude that GDTs can be effective in bringing together divergent points of view to yield new organizational capabilities, but such benefits require that leaders and members recognize early and explicitly the existence and validity of their differences. Copyright © 2004 John Wiley & Sons, Ltd.

The Virtue in Self-Interest

As a motive, self-interest is constituted by a certain kind of concern for oneself; but we also use the term “self-interest” to refer to the object of such a motive, to the well-being or good life sought by a self-interested agent. In this essay, I want to concentrate on self-interest in the latter sense and say something about how self-interest or well-being relates to virtue. One reason to be interested in this relationship stems from our concern to know whether virtue pays, i.e., is in the moral agent's self-interest, a question which Plato notably asks in the Republic and which has been of concern to moral philosophers ever since. But the importance for ethics of notions like virtue and self-interest is hardly exhausted by their role in the debate over whether virtue pays; indeed, any large-scale ethical theory will presumably have something to say about how these major notions relate, so we have reason to want to understand this relationship independent of the particular desire to show that morality or virtue is in the self-interest of the (virtuous) agent.It will be a background assumption of this essay that some ways of connecting virtue and well-being/self-interest redound to the advantage of the larger theories that incorporate them. If, in particular, we believe in the bona fides of ethical theory, then unifying power is a desideratum in ethics and it stands in favor of utilitarianism (and Epicureanism) that it offers us a way of unifying our understanding of virtue and well-being. To be sure, that advantage may to some extent or ultimately be undercut if unification leads to counterintuitive ethical consequences.

Long-Term Financial Contracts can Mitigate the Adverse Selection Problem in Project Financing

This paper shows that long-term contracts can be used in competitive financial markets to separate entrepreneurs of different abilities. In equilibrium poor entrepreneurs are financed with a sequence of standard-debt contracts. Good entrepreneurs are financed with a modified contract, in which the terms of the second part of the contract are contingent upon whether default is observed at the first date. Sorting is achieved through the contingent term in the contract. In equilibrium good entrepreneurs will typically pay high interest rates to start with, followed by relatively lower rates later if they are successful. The solution in the paper is contrasted with the use of collateral. Incomplete information plays an important role in explaining the existence and form of enduring relationships. When agents have private information and cannot precommit to future actions and announcements there may be a role for multiperiod contracts (see Townsend 1982 and Hart and Holmstrom 1986). Such contracts tie future contractual terms to current behaviour. Moreover, these contracts can be self-enforcing, simply relying upon the self interest of agents to see them through. This paper shows that long-term relationships may help overcome adverse selection problems. The basic idea is very simple. Entrepreneurs have different probabilities of completing successive projects successfully. Observation of the returns cannot reveal the type of project. However, repeated observation of returns does give information about the type of project, by the law of large numbers. Even if there are only two observations at successive dates it may be possible to separate types by making the terms of the contract at the second date conditional upon whether default is observed at the first. We consider an entrepreneur who is risk neutral and who has a project at each of two successive dates. The projects may require outside finance from banks. Risk neutral banks offer two-period credit contracts to the entrepreneur. We assume that there are two types of entrepreneur, one with a high probability of completing projects successfully and a second with a low probability. The probability of success is private information to the entrepreneur, it is not known by the bank. The problem of generalising the analysis to more entrepreneur types is discussed in the conclusion. In Section 2 of the paper it is shown that in this setting an adverse selection problem may arise. We consider a sequence of standard-debt contracts which specify a fixed payment at each date. The important point to note here is that with

Self-interest and the Concept of Self-sacrifice

Owing to a genral dissatisfaction with hedonistic theories of value, a number of recent discussions have sought to identify an agent's selfinterest, individual utility, or personal welfare with what the agent most wants to do, all things considered. Two features of these accounts merit special attention for the argument in this paper. First, on such accounts any desire or aversion which persists in the face of complete information is logically relevant to the determination of an agent's self interest. This includes apparently altruistic desires like a desire for another's happiness as well as more narrow and self-regarding desires like a desire to eat a good meal. Second, when the agent finds himself in a situation where he must choose between incompatible desires, his informed preference determines the act which is most in his self-interest.