Superb Posner – but can we go further?

Posner`s (2010) analysis offers many exciting insights into the principal-agent problem, particularly with respect to the secret service. I argue that it would be useful to consider a broader model of human behaviour, which includes awards as extrinsic incentives beyond pay, as well as intrinsic motivation. A more comparative stance that goes beyond the United States would be a useful check of how general the results are. Scholars should not forget that while the US is the dominant economy today, there are 195 nations in the world that offer many fascinating institutional variations, which are useful to take into account. 1. Posner`s performance Richard Posner is one of the most productive scholars in the social sciences. He is at the same time an able academic teacher, a prolific author of books and papers, an Appeals Court judge, and covers a very broad range of subjects. His paper ‘From the new institutional economics to organization economics’ demonstrates these wide-ranging abilities again. He is an impressive example that high quantity is well compatible with high quality of scholarly production. Needless to say, I am a great admirer of Richard Posner. It is therefore a great challenge to me to make suggestions on how this paper can be further improved: where are its limitations, disregarded aspects, and what different avenues would be fruitful? A great strength of his (2010) paper is that he does not linger on methodological issues, but applies his approach to real world issues. I will mainly focus on his most fascinating and insightful analysis of the secret service. Posner ́s earlier paper with Garicano (2005) is, in my view, one of the best recent papers in economics. But let me start with a general critique of how Posner enlarges standard economics by using psychological and sociological concepts such as ‘culture’, ‘incalculated norms of workers’, or ‘high commitment’ (Section 2). I then discuss incentive issues in the secret service (Section 3), and consider Posner`s suggestions of how individuals should be compensated (Section 4). ∗Email: [email protected]. The author wishes to thank Margit Osterloh and Isabel Ellenberger.