Agency problems

摘要

IT IS a lesson straight from undergraduate economics. Do not give the regulated power over the regulators, unless you want consumers to lose out and producers to game the system. The merger of water suppliers and their regulators in Britain in 1973 provides a good example. Water companies fiddled their pollution targets; Britain's rivers and beaches became the dirtiest in Europe. After the separation of firms and supervisors in 1989, Britain soon had some of the cleanest rivers on the continent.