Agency and Dependency

Abstract

At the heart of the merit goods problem there is a fundamental issue of agency. If some individuals are to surrender at least part of their consumer sovereignty to other individuals then for individual welfare to improve it is not enough for the agents to have superior information or decision-making powers, they must also have the incentive to serve properly the true interests of their principal. Until now I have largely ignored the issue except in passing, but it will be the central focus of this chapter.