Marc Allen Eisner

Assessing the Assumptions: A Critical Analysis of Agency Theory

Principal-agent (agency) theory dominates the bureaucratic politics literature. Yet there has been very little effort devoted to assessing the assumptions of agency theory since the model was imported from economics. This article examines five major assumptions underlying agency theory. The authors suggest that the effort to translate and apply assumptions from economics to the study of bureaucratic politics misses much that is important. They offer modifications to agency theory and a new direction for research.

Beyond the Logic of the Market: Toward an Institutional Analysis of Regulatory Reforms

This paper examines deregulation from an institutional perspective. Although deregulation is commonly framed as the diminution of state control and a return to “the market,” the paper argues that this portrayal fails to acknowledge both the complexities of governance and the role of the state in shaping decisions about governance. It is argued that the category of “the market” subsumes a variety of governance mechanisms that economic actors use to coordinate their behavior. Moreover, the market-state dichotomy within which discussions of deregulation are commonly framed ignores the central role of the state in shaping decisions regarding governance. Following deregulation, industry actors commonly employ various governance mechanisms (e.g., long-term contracting, obligational networks) that have little in common with classical markets. Moreover, the evolution of governance regimes is not simply driven by efficiency concerns but is shaped by public policies and institutions. Thus, even under deregulation, the role of law and institutions is foundational. The paper illustrates these points through three cases of deregulation in the United States: commercial aviation, railroads, and finance. Jerusalem Papers in Regulation & Governance