To illustrate the Principle Agent Problem, North gives the example of a buyer …show more content…
His only other option is to continue perpetuating the Principle Agent Problem through means of infinite regress: The buyer may question the specialists credentials, then he my question the accountability of the credential agency, then he may question the authority of those individuals judging accountability, and so on and so forth. During no point during the infinite regression will the home buyer have the asymmetry of information be in his favor; therefore, he will never be satisfied, unless he first takes a leap of faith and decides to trust the infrastructure specialist.
Regardless of whether such a leap of faith is rational or irrational, it is a crucial part of the trust-building process. In the case of the home buyer and infrastructure specialist, who is to say whether the buyer will trust the specialist after one consultation meeting? After two meetings? After reading positive reviews on a website such as Yelp? After seeing a certificate of credentials from a specific agency? It is impossible to tell with 100% certainty when trust is established. The process is difficult and differs for everyone, but luckily is made easier through the existence of …show more content…
In 1958, the American National Election Study found that 73% of people said that they could trust the government (Fingerhut). In 2015, only 19% of people reported that they trusted the government (Fingerhut). Such a stark difference in the level of trust may be due to the perceived lack of transparency of the government or even the perception that the government does not share common interests with the public.
Regardless of the reason why the public does not trust the government, the lack of trust has certainly taken a toll on the state of the nation. The public is less likely to participate in voting, retains a general resentment for the governing body, and is less inclined to inform themselves about current issues, perpetuating the asymmetry of information available for government officials and public