After NPM, curb your enthusiasm for the Principal-Agent theory

Abstract

Today the failures of New-Public-Management-inspired ideas to address classic challenges to a public administration, and the way NPM subsequently created new dysfunctions in state apparatuses, inspire us to scrutinize and decide which theoretical components in this field of research deserve to be retained, and which should be abandoned. This is not motivated by any conviction that, somewhere out there, there is a new “grand theory” that simply needs to be discovered. It is argued that not only the future challenges in public administrations, but also those still current, require us to make use of the wide range of analytical tools already available. It also requires a stance against reductionist economic theory. To make this point, this article focuses on the Principal Agent Theory and its origins, underlining that it remains an increasingly popular approach to the analysis of public administration, but arguing that both normatively and theoretically this theory is more problematical than is usually recognized.