Thursday, 30 April 2009

Incentives matter: Bible file

The principal-agent problem is as old as the Bible. John 10:11-13.
The good shepherd lays down his life for the sheep. The hired hand, who is not the shepherd and does not own the sheep, sees the wolf coming, deserts the sheep, and runs away. So the wolf snatches them and scatters them, because he is a hired hand, and the sheep don’t matter to him.

3 comments:

djp said...

heh, very true... the sad thing is the bumbling bureaucrat probably has even less incentive then the hired hand

Ryan said...

Love the post, it is a great example of agency theory. Do you find any scriptural support for using incentives to increase the "hired hands" motivation to try harder or align their motives with the owner?

Thanks!

Ryan said...

Excellent point! Do you see any scriptural support for the use of money/rewards/incentives to align the "hired hands" motives with the owner's motives?

Thanks