POLITICAL REPRESENTATION FROM THE PRINCIPAL–AGENT PERSPECTIVE

Political representation derives its rationale from transaction cost reasons, as the population elects an assembly to speak and act for its interests; this gives rise to principal‐agent interaction, which may be analysed with the general principal‐agent model (PAM) from the economics of information. The PAM entails that the body politic will introduce institutions that minimise the risk of a worst‐case scenario, namely that the ruling political elite dissipates social welfare (total income) while remunerating themselves highly. Politics in well‐ordered societies have strong principal‐agent institutions that counteract the probability of moral hazard and adverse selection. Political representation in assemblies inserts a set of agents between the population and the executive, alleviating the principal‐agent problematic in all forms of politics. The radical solution to agent opportunism in political representation—the imperative mandate—is unfeasible to monitor and not credible.