principal-agent relationship

Cost and benefit of wars are not alternative. For example, GDP of the U.S. includes military expenditure. This is very important factor to keep the greatest GDP in the U.S. In addition, the military industry is important domestic market in the U.S. The market creates huge tax revenue, money supply, thousands of job opportunities, and votes for politicians. On the other side, benefit also can be cost. Saddam Husayn, Al Qaeda, and Islamic state, these are supported by the U.S. in the past, and they are (or were) threat to U.S. now. There were principal-agent relationship between them and the U.S., and it caused the agent problem.

The agent problem is caused by asymmetric information between principal and agent. Although this is crucial issue in the principal-agent relationship, there is one basic method to solve this problem. It is monitoring. By monitoring the agent, the principal can avoid asymmetric information between them. Then, President Obama plans to do this solution in Afghanistan next year.

According to the article in New York Times on November 21st, President Obama decided to authorize a more expansive mission for the military in Afghanistan in 2015 than originally planned. This presidential decision was made based on two big issues, which this article mentioned. First, to strengthen Afghanistan military is important to prevent from being failed state like Iraq. The U.S. government took back the military from Iraq before the Iraqi government’s authority and military became strong enough. Therefore, Islamic state had the opportunity to expand their power over Iraq as well as Syria, which is also failed state. The second goal is to transfer of power in Afghanistan to President Ashraf Gahni, who has been far more accepting of an expansive American military mission in his country than his predecessor, Hamid Karzai.

He seems like to try to reduce the real cost of war, and maximize the benefit. It is important to identify benefit and cost of war to evaluate wars. Then, what do you think the cost and benefit of this war are? And do you think this war is beneficial for the U.S?




2 thoughts on “principal-agent relationship

  1. It seems like a defeatist situation that will ultimately be completely reliant on the U.S. staying in the region as long as possible. Providing security seems like a very nice move but could be seen as futile in the end because many say that the second the U.S. leaves the state will immediately fall to “terrorism”. We’ll have to see.


  2. I agree with mako999. It is hard for the U.S to intervene because of the unstable countries in the Middle East as it is, but expanding the military over there will just make Afghani people more dependent on the U.S. Hard to say if external intervention will work, but from a historical perspective, the Middle East doesn’t do too well with it.


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