INTRODUCTION

The rational choice theory is a social science theory that assumes that individuals
make decisions based on their own self-interest, or what they believe is in their best interests.
The assumptions focus on the how or why individuals make choices. The theory suggests that
individuals are rational actors, and have and are consistent to their preferences. One of the
theories under the rational choice theory is the principal-agent theory, which studies the
relationship between two parties: a principal, who hires an agent to act on their behalf, and
the agent, who performs the task. The principal-agent theory was first formulated in the 1970s
by economists Michael Jensen and William Meckling. They were interested in understanding
the relationship between shareholders (the principals) and managers (the agents) in
corporations. Aside from the rationality and self-interest, the principal-agent theory assumed
that there is an asymmetrical distribution of information and resources between the two
parties, and that the agent may be opportunistic and may take actions that benefit themselves
at the expense of the principal (Hulsman, 2006).

These assumptions are important for understanding the dynamics of principal-agent

relationships. For example, the assumption of rationality helps to explain why principals and
agents may choose to enter into contracts with each other. The assumption of self-interest
helps to explain why principals and agents may take steps to monitor and safeguard their own
interests. The assumption of limited information helps to explain why principals may need to
invest in mechanisms to monitor the agent's behavior. And the assumption of opportunism
helps to explain why principals may need to design contracts that incentivize the agent to act
in the principal's best interests (Bosse & Phillips, 2006). However, it is important to note that
the assumptions of this theory are simplifications of reality. Individuals are not always perfectly
rational or self-interested. They may also have different levels of information and may be
motivated by a variety of factors, including social norms and altruism. However, the
assumptions of rational choice theory provide a useful framework for understanding the
dynamics of principal-agent relationships.

On the other hand, principal-agent theory can be applied to the study of political behavior,
including why politicians seek government powers. According to rational choice theory,
politicians seek government powers because they believe that it will benefit them in some way.
By an increased income and wealth, power and prestige, enable them to help their
constituents, and implement their own policies and agenda. Furthermore, the principal-agent
theory can be used to explain why politicians in contemporary democracies are often more
responsive to the demands of special interests than to the interests of the general public,
however, the theory is too simplistic and does not adequately account for the complexity of
human behavior, and it is biased towards the principal, too pessimist, does not recognize the
role of institutions, and does not account the role of ideology.

Analysis of the Desire of Political Power

The aim of the principal-agent theory is to understand the relationship between a

principal and the agent themselves. The theory posits that there is always a potential for
conflict of interest between the principal and the agent, as the agent may have their own goals
and motivations that may not align with the principal's. Jensen and Meckling argued that
managers may be motivated to act in their own best interests, such as by increasing their
salaries or perquisites, even if this is not in the best interests of shareholders. The principal-
agent theory has since been applied to a wide range of other contexts, including the
relationship between politicians and voters, employers and employees, and teachers and
students. The theory is useful for understanding a variety of challenges that arise in these
relationships, such as corruption, moral hazard, and adverse selection. The theory is essential
in understanding the real-world problems, which includes corruption, moral hazard, and
adverse selection.

In addition, the theory explains variety of reasons why politicians may seek power. Politicians
may use their power to give themselves and their allies access to lucrative contracts, jobs, or
other benefits. They may also use their power to influence government policies in a way that
benefits their personal financial interests. Government power is a valuable commodity, and
politicians who have it are often respected and admired by others. They may also have access
to exclusive opportunities and resources. To implement their own policies and
agenda. Politicians often have strong beliefs about the role of government and how society
should be organized. By seeking power, they can implement their own policies and promote
their own vision for the future. It is important to note that not all politicians are motivated by
the same reasons. Some politicians may genuinely be motivated by a desire to make a
difference in the world, while others may be more motivated by personal gain or ambition.

However, principal-agent theory does provide a useful framework for understanding why
politicians seek power and how they use their power once they have it. A politician may be
motivated to seek power in order to enrich themselves or their allies by awarding lucrative
contracts to companies that are owned by their friends or family members. A politician may be
motivated to seek power in order to increase their power and prestige by passing legislation
that gives them more authority or by securing a high-ranking position in government. A
politician may be motivated to seek power in order to implement their own policies and agenda,
such as by-passing legislation that supports their particular ideology or by appointing judges
who share their views. It is important to note that principal-agent theory does not assume that
all politicians are corrupt or that they are only motivated by personal gain. However, the theory
does suggest that there is always a potential for conflict of interest between politicians and the
people they represent. This is why it is important to have institutions and safeguards in place
to hold politicians accountable and to prevent them from abusing their power (Dobbin & Jung,
n.d).

The theory provides a useful framework for understanding the potential for conflict of interest
in a wide range of relationships, such as between politicians and voters, employers and
employees, and teachers and students. It can be used to design institutions and policies that
can mitigate the risk of conflict of interest and to improve the alignment of the goals and
motivations of principals and agents. It has been empirically tested in a variety of contexts,
and it has been shown to be a useful tool for explaining and predicting human behavior.
However, it can be too simplistic and may not adequately account for the complexity of human
behavior. For example, the theory assumes that both principals and agents are rational actors
who are solely motivated by their own self-interest. However, in reality, people are often
motivated by a variety of factors, including altruism, cooperation, and fairness. It can be biased
towards the principal and may not adequately consider the interests of the agent. For example,
the theory assumes that the principal has all the information and that the agent is perfectly
informed. However, in reality, both principals and agents often have imperfect information,
which can lead to misunderstandings and conflict. It can be difficult to test in practice. This is
because it is difficult to measure the goals and motivations of both principals and agents. Term
limits are designed to reduce the risk of politicians becoming too powerful and abusing their
power. Campaign finance reform is designed to reduce the influence of special interests on
politicians. Independent regulatory agencies. Independent regulatory agencies are designed
to oversee industries and protect consumers from abuse. Audits and financial reporting
requirements. Audits and financial reporting requirements are designed to ensure that
corporations are transparent and accountable to their shareholders.

The real scenarios or phenomena of this theory comes from a variety of sources, including
economic studies, political science research, and psychological experiments. One of its
applications can be present between corporations and shareholders, teachers and students,
and politician and voter. In a democratic country, the principal-agent theory is characterized
by the politicians as agent and the people as principal. Studies have shown that corporate
executives are more likely to make decisions that benefit themselves personally, even if it puts
the corporation at risk. For example, one study found that executives were more likely to
approve risky investments if they were compensated with stock options, which would give
them a financial benefit if the investments paid off. The teachers are more likely to give
students easy grades in order to make their job easier. For example, one study found that
teachers were more likely to give students easy grades if they were facing a heavy workload
or if they were teaching in a difficult school district. Lastly, the politicians are more likely to
vote for legislation that benefits their donors, even if it is not in the best interests of the general
public. For example, one study found that members of the US Congress were more likely to
vote for legislation that benefited their home districts, even if it was less efficient or cost-
effective than other options.

It is important to note that rational choice theory does not assume that all politicians are
motivated by greed or self-interest. Some politicians may genuinely be motivated by a desire
to make a difference in the world. However, rational choice theory does provide a useful
framework for understanding why politicians seek government powers and how they use their
power once they have it. Suppose that a politician is motivated by a desire to increase their
income and wealth. They may believe that the best way to do this is to hold a government
position that gives them access to lucrative contracts or jobs. They may also believe that they
can use their government position to influence government policies in a way that benefits their
personal financial interests. According to rational choice theory, the politician would be likely
to seek government power because they believe that it is in their best interests to do so. They
would weigh the costs and benefits of seeking government power and conclude that the
benefits outweigh the costs. Of course, not all politicians are motivated by the same reasons.
Some politicians may be more motivated by a desire to make a difference in the world, while
others may be more motivated by personal gain or ambition. However, rational choice theory
can be a useful tool for understanding why politicians seek government powers and how they
use their power once they have it (Shaw, 2002).

Furthermore, there is a potential for conflict of interest between politicians and the people they
represent, as the agent may have their own goals and motivations that may not align with the
principal's. Politicians may be motivated to engage in corruption, such as bribery or
embezzlement, in order to enrich themselves or their allies. This can be seen as a conflict of
interest between the politicians (the agents) and the voters (the principals). Employees may
be less likely to work hard or to avoid taking risks if they know that they will be bailed out by
their employer if they fail. This can be seen as a conflict of interest between the employees
(the agents) and the employer (the principal). Students who are less likely to succeed in school
may be more likely to choose teachers who are known to be easy graders. This can be seen
as a conflict of interest between the students (the agents) and the teachers (the principals).
Critics argue that principal-agent theory is too simplistic and does not adequately account for
the complexity of human behavior. For example, the theory assumes that both principals and
agents are rational actors who are solely motivated by their own self-interest. However, in
reality, people are often motivated by a variety of factors, including altruism, cooperation, and
fairness. On the other hand, the theory is biased towards the principal and does not adequately
consider the interests of the agent. For example, the theory assumes that the principal has all
the information and that the agent is perfectly informed. However, in reality, both principals
and agents often have imperfect information, which can lead to misunderstandings and
conflict.

Meanwhile, it is difficult to test empirically. This is because it is difficult to measure the goals
and motivations of both principals and agents. In addition to these general criticisms, there
have been a number of specific criticisms of principal-agent theory in the context of
contemporary politics. The theory does not adequately account for the role of institutions in
shaping the behavior of politicians. Others have argued that the theory does not adequately
account for the role of ideology in motivating politicians. Institutions, such as laws, rules, and
norms, can play a significant role in shaping the behavior of politicians. For example, strong
anti-corruption laws can make it more difficult for politicians to engage in self-dealing.
However, principal-agent theory does not adequately account for the role of institutions. It
does not adequately account for the role of ideology. Ideology, or a set of beliefs about the
role of government and society, can also play a significant role in motivating politicians. For
example, some politicians may be motivated by a desire to implement their ideological agenda,
even if it is not in the best interests of their constituents. However, principal-agent theory does
not adequately account for the role of ideology. It is too pessimistic. Principal-agent theory can
be seen as a pessimistic view of human nature, as it assumes that people are solely motivated
by their own self-interest. However, there is evidence that people are also motivated by
altruism, cooperation, and fairness. This suggests that principal-agent theory may be too
pessimistic in its view of human behavior.
 CONCLUSION

The rational choice theory has been used to study a wide range of human behavior,
including political behavior, economic behavior, and social behavior. One of the subsets of
this theory is the principal-agent theory, which is a complex and nuanced theory, but it is a
valuable tool for understanding human behavior and designing institutions and policies that
can promote good governance and economic efficiency. These theories greatly put an
emphasis on the self-interest, preferences, and rationality of an individual. Moreover, it too
simplistic and for not adequately accounting for the role of emotions and other factors in
human decision-making. But still, rational choice theory remains a valuable tool for
understanding how people make decisions. It argues that one person is more likely to
cooperate with others if they believe that they will be rewarded for their cooperation and
punished for their defection. This suggests that people are motivated by the potential for
personal gain or loss, which is consistent with the assumptions of principal-agent theory. The
application of this theory on the governing and governed within a democratic country entails
that the agent can provide services which maximize benefit for its own and for the principal,
but when the interest of the principal does no longer serves the agent’s interest, conflict
inevitably follows.