ECON 2720 Lecture 2: Week 2.pdf
20 Jan 2014
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Document Summary
The principal/agent problem refers to the problem of how to design incentives for the agent so he will act in the best interest of the principal. Many people believe the problem of the recent financial crisis is incentive structures being designed incorrectly so people act in the best interest of themselves. Xenophon (400bc) was the first person to write about this problem in athens. Athenians elected not only political leadership but military leadership as well. Political leaders would swing the vote against some military leaders forcing them into exile even though they were fantastic generals. Xenophon led an invasion as persia and wrote one of the best military memoires ever. When returning to athens he has exiled for an unknown reason and then began writing philosophy with plato and other greek philosophers.
