Principal-agent theory in complex operations

Abstract

Originally developed for identifying costs of coordination between labor and management in economics, principal-agent theory challenged traditional explanations for friction in political relations, especially in a democracy, between elected officials and the permanent bureaucracy. Not without controversy, the approach recasts democratic civil–military relations, featuring as agent a unique, military ‘bureaucrat’ refining goals of the state, a role normally assigned to the principal. At the same time, principal-agent applications reached international institutions as a collective actor in their own right. Drawing from civil–military relations and international institutions, this article poses still greater expansion for principal-agent dynamics. Principal-agent theory offers significant promise in complex international operations mixing inter-state, state, sub-state, and nongovernmental organizations because it clearly delineates culturally bounded normative arguments from resource-based logics; it also suggests moves such as building flexible membership institutions ahead of time to improve cooperation among international actors during the next crisis.

Keywords:

• Principal-agent
• international community
• complex operations
• Afghanistan

Acknowledgements

This article is academic work and does not represent the official views of the United States Government or the United States Air Force. The author gratefully acknowledges Chiara Ruffa and the Workshop on Complex Operations held at Uppsala University, Sweden, 20 − 21 September 2012; Roger Harrison; Pete Tolles; Jonty Kasku-Jackson; and Sashi Kumar for helpful comments as well as Kersti Larsdotter for sharing her dissertation, ‘Military Interventions in Internal Wars’.

Notes

 1. Bennett, ‘Gates’ QDR'; Jacobs, ‘EU Civilian Crisis Management’. See also the introduction to this special issue of Small Wars & Insurgencies.

 2. This option was discussed before the Libya intervention in spring 2011. It divided members of the international coalition forming to rescue the city of Benghazi. Preston and Benali, ‘Libya. The Observer Debate’. For cautionary advice at the grand strategic level, see Brzezinski, Strategic Vision; Gelb, Power Rules; Bacevich, The Limits of Power; Layne, The Peace of Illusions.

 3. ‘First among equals’: the sovereign state with greatest economic and military power.

 4. Realist and liberal approaches have been applied to the question of grand strategy after Iraq and Afghanistan, a topic that includes establishing doctrine, as far as possible, for military intervention and complex operations. Layne, The Peace of Illusions; Ikenberry, Liberal Leviathan.

 5. Waltz, Theory of International Politics, 127.

 6. Textbook formulations of the principal-agent model for contracts between labor and management can be found in Milgrom and Roberts, Economics, Organization, and Management and Kreps, A Course in Microeconomic Theory. See also Coletta and Feaver, ‘Civilian Monitoring’, 108–10, n. 6.

 7. Coletta, ‘There Are Several Principals’.

 8. Brehm and Gates, Working, Shirking, and Sabotage.

 9. Samuel Huntington and several prominent scholars who studied under him applied this insight to the US military as a public agent that served under legal obligations to both the president and Congress. Huntington, The Soldier and the State; Desch, Civilian Control of the Military; Feaver, Armed Servants.

10. Feaver, Armed Servants incorporates the costs to the principal of monitoring and punishment. See his ch. 4 for the model and chs 5–7 for case analysis.

11. Brehm and Gates, Working, Shirking, and Sabotage; Meier and O'Toole, Bureaucracy in a Democratic State.

12. Feaver, ‘Crisis As Shirking’; Avant, ‘Reluctant Warriors’; Weiner, ‘Resource Allocation’.

13. Dunlap, ‘Origins of the American Military Coup of 2012’.

14. Holsti, ‘Of Chasms and Convergences’, 84 and tables 1.27, 1.28. See also Owens, ‘Rumsfeld’, 72–74.

15. Feaver, Armed Servants, 6, 9, passim.

16. Milburn, ‘Breaking Ranks’; Hoffman, ‘Dereliction of Duty Redux?’; Gibson, Securing the State. For application of a related concept, ‘the unequal dialog’ between civilian superior and military agent, see Cohen, Supreme Command; for a prominent critique, see Desch, ‘Bush and the Generals’.

17. Bacevich, ‘Absent History’; Burk, ‘The Logic of Crisis’. See also Waterman and Meier, ‘Principal-Agent Models’.

18. Acknowledging this special status, Feaver called for a hybrid approach, lying somewhere between the normative standards of civilian and professional supremacists. Feaver, ‘The Right to Be Right’, 87–125, esp. 89.

19. Hoffman, ‘Dereliction of Duty Redux?’, 232–33; Owens, US Civil-Military Relations, p. 31.

20. Principal-agent applications progressed from microeconomics of the firm; to limited government bureaucracy; civil–military relations; and to international organizations. At each step, the actors, instruments, and goals addressed by principal-agent theory became more similar to these same fundamental elements as they occur in today's international coalitions. For actors, instruments, and goals as building blocks of international relations theories, see Nye, Understanding International Conflicts, ch. 1 and p. 33.

21. Ikenberry, Liberal Leviathan, ch. 5 – ‘The Rise of the American System’; Moravcsik, The Choice for Europe; Keohane, After Hegemony.

22. Ruggie, ‘International Regimes’.

23. Ikenberry, Liberal Leviathan, 279–332.

24. Held and Koenig-Archibugi, Global Governance and Public Accountability. For recent news stories, see Taylor, ‘Analysis: Over-Complex Europe’ and Smyth, ‘EU Democratic Deficit’.

25. Jones, In the Graveyard of Empires critiqued emergency response from a US-centric perspective, plagued as it was by diversion of resources to Iraq, misallocation within Afghanistan, and resulting lack of coordination throughout the Afghanistan–Pakistan theater of complex operations. See also Morelli and Belkin, NATO in Afghanistan.

26. A representative account of this struggle during the post-Cold War dissolution of Yugoslavia may be found in Allied commander Wesley Clark's memoir, Waging Modern War. General Clark felt both the local and Washington pressures acutely as he was dual-hatted, taking on the roles of NATO Supreme Allied Commander and Commander-in-Chief, Europe for the United States.

27. Stenersen, The Taliban Insurgency; Nawaz, ‘Aid Workers Become Targets’.

28. Berry and Wilcox, The Interest Group Society, 157–69; Heclo, ‘Issue Networks’. For application of the issue network concept to shaping public policy at the sub-governmental level, see Hallacher, Why Policy Issue Networks Matter. For issue networks at the level of international organizations, see Sikkink, ‘Human Rights’.

29. Country-based caveats for ISAF contingents complicated international coordination as the Taliban regrouped and security conditions in Afghanistan deteriorated after 2006. Morelli and Belkin, NATO in Afghanistan, 10–11.

30. The ‘rational baseline’ may be the last refuge of modeling scoundrels, but the idea is still powerful. Brown et al., Rational Choice and Security Studies; Fearon, ‘Rationalist Explanations for War’.

31. Once again, the NATO analogy seems relevant. Ivanov, Transforming NATO; Ivanov, ‘The Relevance of Heterogeneous Clubs’. In a recent issue of Armed Forces & Society, analysts critically evaluated customarily rigid and hierarchical civil–military relationships, advocating looser, network organization in order to raise the level of cooperation when under stress from responding to complex emergencies in places like Afghanistan and Iraq. Perez, ‘The Soldier as Lethal Warrior’; Schiff, ‘Concordance Theory’.