\documentclass[12pt,epsf]{article}

%  pdflatex    trustees-rasmusen.tex

%\includegraphics[width=150mm]{fig07-01.jpg}

\usepackage{graphicx}

\usepackage{amsmath}

 \usepackage{amssymb}

\reversemarginpar

\topmargin  -1in

\oddsidemargin .25in

 \textheight  9.4in

 \textwidth 6.4in

         \begin{document}

  \parindent 24pt

\parskip 10pt

\baselineskip 16pt

\titlepage \vspace*{12pt}

\begin{center}

\begin{LARGE}

 \textbf{  Not Principals and Agents, but Beneficiaries and Trustees   } \\

\end{LARGE}

 \bigskip

 WORKING PAPER\\ (Comments welcomed)

\bigskip

  24 August 2005. \\

\bigskip

Eric Rasmusen \\

\bigskip

\textit{Abstract}

\end{center}

 These are notes starting from  Rasmusen (1997) to try to take up the idea proposed there. It is barely started. Independent central bankers and judges can both be  more usefully viewed as   {\it trustees} than as {\it agents}.  A trust is a  legal institution with rules set up by a {\it settlor}, administered by a {\it trustee} on behalf of {\it beneficiaries}.   Public trustees often are motivated more by Pride, Policy, Place, and Power than by money, and economists should take this into account.

\noindent

 {\small \hspace*{20pt} Dan R. and Catherine M. Dalton Professor, Department  of Business Economics and Public Policy,   Kelley School of Business,Indiana University,  BU 456, 1309 E. 10th Street, Bloomington, Indiana, 47405-1701. Office: (812) 855-9219. Fax: 812-855-3354. Erasmuse@indiana.edu.\newline
 http://rasmusen.org, http://rasmusen.org/papers/trustees-rasmusen.pdf.  }

%%-----------------------------%----------------------------- 


\newpage

 \begin{raggedright}

 \parindent 24pt

 \parskip 10pt

\begin{small} \begin{quotation}

 ``The lawmakers virtually sit on the board of directors of a \$35 billion entity called Pennsylvania,'' House Democrat Leader H. William DeWeese told the Philadelphia Inquirer.

That's how Rep. DeWeese is defending the recent legislative pay grab in Pennsylvania in which the state's politicians voted themselves salary hikes ranging from 16 to 38 percent, by comparing the Legislature to a corporate board that's running a multibillion-dollar company. ...

For Mr. DeWeese to ``virtually sit on the board of directors of a \$35 billion entity called Pennsylvania,'' his new annual paycheck, up nearly 40 percent from last year, is \$137,771 -- not counting the free car, expense accounts, free prescriptions, staff money, free parking, fully paid health and long-term care insurance, free gas, defined-benefit pension, dental and vision coverage, ``walking around money,'' and the \$128 daily reimbursement for every day the Legislature is in session, even if somebody else is picking up the tab for lunch and dinner.\footnote{``Hog Heaven,'' {\it The American Spectator}, Ralph R. Reiland, http://www.spectator.org/dsp\_article.asp?art\_id=8627, (8/23/2005 12:05:58 AM).}

\end{quotation} \end{small}

\noindent \textbf{1. Introduction}

  xxxx Not written yet.

%---------------------------------------------------------------

\bigskip

\noindent {\bf 2 A Theory of Trustees}

  First,   I must talk about   agents.

    Agency is an old concept in Anglo-Saxon law that has been widely used in economics since the  1970's.  One party, the  principal, hires another, the agent, to act for him. The principal can issue orders of varying specificity and can compensate the agent in various ways. He  can fire the agent at any time unless they have a contract that forbids it, and even if  the contract requires him to keep paying the agent, he can  end the status as ``agent'' by  removing all the authority delegated to the agent.  In law, the main questions involving agents concern  the effect on third parties of misbehavior such as negligent harm or making unauthorized contracts, something I have written about in Rasmusen (2004).  In economics, the main questions involve how  the agent's compensation can be designed to  make him follow orders properly rather than shirking.   All of the problems  economists usually study, though, would disappear if the principal had the same information as the agent, knowing the state of the world at every moment and knowing what actions the agent has taken.

      Thus, this paradigm does not fit   governments  and independent  central bankers. If the central bank is independent, it is acting on behalf of the government, but not under its orders.   The government may very well know that the central bank is keeping interest rates high, but it cannot fire the central bank.   Not agency, but a  different legal paradigm is appropriate: the trust.

   A trust is created when one party, the  Settlor,  grants some property to be controlled by a second party, the Trustee, on behalf of a third party, the Beneficiary. In the law,  one person can fill more than one of these roles, and indeed could perhaps fill all three-- I would have to do more research to discover that.  A father can, for example, put    ten thousand dollars in trust for his son's education, with himself as trustee.     If he changes his mind later, he cannot take back the money (unless the trust is ``revocable''), but as trustee he can control how it is invested.

  The purpose of a trust is to make a commitment.  Once the trust is set up, the Settlor no longer has   control over the assets.  Nor does the Beneficiary have control; the Beneficiary may be unhappy about how the trust is managed, but the Trustee  is not obliged to obey the Beneficiary's orders, and often a trust is set up precisely because the Beneficiary's desires are to be thwarted. The father in my example could have given the money directly to his son, but he chose to tie it up a trust for a specific purpose instead.

       Trusts are better for commitment than either contracts or promises. Promises, as opposed to contracts,   generally cannot be enforced in Anglo-Saxon law, and when they can be enforced, it is often on the logic that the promise has implicitly set up a trust for the one to whom the promise was made. Contracts are enforceable, of course, but  not if both parties decide to  waive enforcement   (see Section  IIIe  of  Rasmusen \& Stake (1997) for references). A Trustee is bound to carry out the terms of the trust, however, even if     the Beneficiary objects.\footnote{Note, however, that if    the Settlors and Beneficiaries unanimously agree, then   the Trust can generally be dissolved, even against the will of the Trustee, and probably  against the explicit terms of the Trust. See the Restatement, Second, of  Trusts, Section 337, the Reporter's Notes to which say that in England the Beneficiaries can terminate the trust even if that defeats the Settlor's purpose, citing   {\it  Saunders v. Vautier}, 4 Beav. 115 (1841), though in America this is not allowed.    }

  Let us now return to  government institutions. These are often usefully viewed as trusts. Consider elected officials. Generally they  are completely free of the control of the citizens between elections, though they can be sued for malfeasance in the courts. Thus, they are not agents, but trustees.  As Rousseau said in  {\it The Social Contract}, Book III, Chapter 15,   ``The English people believes itself to be  free; it is gravely mistaken; it is free only  during the election of Members of Parliament; as soon as the Members are elected, the people is enslaved.''    Only if  elected officials can be recalled-- as  they can in certain American jurisdictions-- are they properly agents rather than trustees with limited terms.  In fact,  the American system was set up to have federal officials with diverse degrees of independence. ``Representatives'' were elected every two years by popular vote, but ``Senators'' were deliberately chosen only every six years, and then by the state assemblies rather than by the voters. (This was later replaced by direct election by the voters, but still only every six years.)   The purpose of the six-year term is explicitly so that the senators will be unresponsive to the popular will.

  Federal judges are the extreme. They are appointed for life, and can be removed only by  special impeachment proceedings of Congress.  There is    a literature    that looks at the advantages and disadvantages of this independence.\footnote{See Cooter (1983) and Posner  (1994)  on judicial objectives,  Ramseyer (1994) on  the Japanese judiciary,   Spiller \& Gely (1995) on  the interaction between Congress and the U.S. Supreme Court, Rasmusen  (1994) on precedent as a control,   and Ramseyer \& Rasmusen (1997) on political influence on judges in Japan. }   The seminal article is Landes \& Posner (1975),  which notes that independent judges help solve a commitment problem.  If judges were agents of Congress, then Congress could pass laws repudiating its previous agreements. Consequently, nobody would make agreements with the government.  By delegating the power to enforce agreements to independent courts as trustees, Congress induces others to trust its agreements.

 Many such cases exist, in which a Settlor government  gives  some of its powers to a Trustee institution because the government knows it would be tempted to abuse those powers otherwise.  A more specific example is the way in which the U.S. Congress votes to give ``fast track authority'' to the President to make trade agreements.  Under fast track authority,  Congress agrees not to amend any agreements the President makes with foreign countries, but only to vote the agreement up or down.  Congress delegates this power because it knows that otherwise it will be irresistably tempted to amend the agreement, and this will make foreign  negotiations futile.

         Independent central banks are also Trustees, with the elected government as Settlor and the citizenry as Beneficiaries.  The property in trust is the power to inflate the currency, a power with which the elected government does not trust itself. Central banks that are not independent, on the other hand, are Agents, carrying out the orders of the Principal, the elected government,  whether that be to inflate the currency or not.   This is the well- known idea of Barro \& Gordon (1983) and Rogoff  (1985) rephrased.\footnote{See also Miller (1997), which, like this paper, analogizes central bankers to judges, and  follows the paradigm of Landes \& Posner's 1975 article on judges to argue that the purpose of an independent central bank is to enforce contracts made by the government. }   The fundamental problem is the government's desire to inflate the currency.  This has three advantages for the elected officials. First,  it generates short-term macroeconomic gains by reducing interest rates and stimulating investment. Second, it  earns seigneurage which can replace tax revenue. Third, it reduces the value of the national debt, reducing the government's liabilities.      None of these mechanisms, however, have desirable long-term effects,   and the inflation that results is costly in itself. Thus, it may be desirable to give this power to a Trustee.

     Not all central banks  are Trusts, of course, only  independent ones. The central banks of the United States and Germany have a high degree of independence, and can viewed as Trusts. The central bank of Turkey and many other countries are better viewed as Agencies.  The  effects of each organizatonal form  are what the vigorous discussion in academia is all about.\footnote{Institutional details clearly matter tremendously in this discussion. See Goodhart (1995) for a book-length treatment of these.}

             The biggest problem that arises with Trustees, a problem for both judges and central banks, is that the Trustee might not act on behalf of the Beneficiary or according to the terms of the Trust.   If the Trustee is independent, how will he  decide how to use  his  power?  Driffill (1997)  and Miller (1997)   survey  the large literature that has developed to look at that question in macroeconomics and political science, a literature that includes much discussion of how to design optimal incentives for central bankers.  Before we can reach the question of optimal contracts, though, we must address the question of  what bankers care about, what they would maximize in the absence of external constraints.

           So what do Trustees care about? The usual arguments of a utility function in principal-agent models are effort and money. Those are important for many Trustees, too. When a bank acts as a Trustee for a spendthrift trust created to give an income to an heir, for example, the bank values the fees it collects and will minimize its effort subject to the constraint of its legal duties, its reputation in the market for becoming a trustee, and, one hopes, a sense of moral  duty. The problem of trustee misbehavior, whether in collecting overgenerous fees, exerting too little effort, or stealing from the trust are well worth studying.

             Here, however, we will concentrate on more metaphorical trustees-- judges, politicians, and central bankers.  The proper way to model their utility functions is different.   Effort and money are minor concerns.     It is rare for abuse of power by  these trustees to take the form of low effort. Nor can varying their compensation be expected to make much difference.\footnote{Hence, the literature represented by Walsh (1995) and Goodhart \& Huang  (1995), in which central bankers'  compensation is linked to inflation and unemployment rates,  is misguided.  I have not yet seen a copy of Bruno Frey's new book, {\it Not Just for the Money: An Economic Theory of Personal Motivation}, but it would seem useful for this kind of task. }   I have suggested elsewhere that politicians should be paid generously because their salaries are trivial compared with the amount  of wealth that their decisions affect, and we would like to reduce their marginal utility of income to reduce the temptation to steal (Rasmusen [1992]).  But all three of these occupations select for people who care less for money than for other things. Most politicians could increase their income by quitting politics for the private sector, and this is true of the vast majority of judges (above the local level) and central bankers in most countries.  This is no less true because of the fact that their high alternative income often arises from their having held those positions-- once they hold the positions, if they value money much, they will resign quickly.\footnote{On the other hand, trustees can make large amounts of money by stealing. I should discuss this. It is not something the contract can deal with, but laws against trustee theft are very important, and some trustees take the job to get the opportunity to steal.}

           The Chairman of the Untied States  Board of Governors of the Federal Reserve, for example,  earned a salary of \$133,600 in 1995, while the lowest- paid president of the twelve Federal Reserve District Banks earned \$177,550, and even the  head   of the  Research and Statistics department  at the Board of Governors earned more than Chairman Greenspan.\footnote{See Thomas (1997) at 299 and    Cassidy (1996) at 41.  Also,  it seems that in 1996 the head of custodial services was earning  \$163, 800 per year (Ralph Vartabedian,  ``Tightfisted Fed Generous to Own Staff, Panel Reports, ''  {\it Los Angeles Times} , September 12, 1996, p. D1). }  Compare this with   \$2,989, 832,   the   1995 annual salary plus bonus of  the CEO of the Bank of Boston Corp. , or the  \$494, 615 for the fifth-highest-paid officer of that bank.\footnote{Salaries from p. 19 of www.sec.gov/Archives/edgar/data/36672/0000950135-97-001232.txt,  on November 7, 1997. }  When Board members leave office, their salaries rise. This was true even of    Board member Alan Blinder, a professor of economics,  who increased his salary when he returned to academia in 1994, and who  must have increased his earnings far more with  the consulting activities Princeton allows him ( Cassidy (1996), at 46 ).

The position of  federal  judges in the United States   is similar:   virtually all of them could earn more if they lost their jobs.  Elsewhere in the world this is also true; this is why in our  forthcoming paper on the Japanese judiciary, Mark Ramseyer and I felt comfortable in proceeding without salary data to look at judicial rewards in terms of location and  court hierarchy.

  So what do trustees want?  I suggest a ``Four P's'' approach, hijacking a slogan from marketing.  The ``Four P's of Marketing'' are Price, Product, Promotion, and Place.  My  ``Four P's of Trustees''   are Policy, Pride, Place, and Power.

       POLICY refers to the trustee's desire to see particular policies in place, usually because of his political or moral principles. A central banker has a personal preference for the inflation rate. A judge has a personal preference for whether abortion is legal or not. A politician has a personal preference for  the rate of income tax. A good way to model this is to label the trustee's policy choice $x$, his personal preference $x_i$, and the settlor's preference $x^*$, where all these variables lie in the interval $[0,1]$. The Trustee wants the policy to be as close to his desired policy as possible, so let us have $\frac{1}{(x_-x_i)^2}$  enter his utility function.

    PRIDE  refers to the trustee's reputation for competence. A central banker wants to be known as someone who understands the economy and the effects of the instruments at his disposal. A judge wants to be known to the legal profession as someone who can argue cogently for his positions and who knows the law. A politician wants to be known as someone who can get things done. Let us denote Pride by the variable $y_i$ for Trustee i's perceived ability, a variable lying on the $[0, \infty]$ continuum.

      PLACE is the  Trustee's job. He likes being a trustee, and does not like being fired, quite apart from the losses in the other variables. Central bankers, judges, and elected officials all  are granted deference and perks based solely on their positions, and instantly lose most of this when they leave their positions. Let us denote Place by $Z_i$, which take the value 0 if the Trustee loses his job and 1 if he keeps it.

  POWER is a different dimension than Place. A trustee can keep his position but have no discretion to do anything. Or, the trust could separate out position and power; the emperor is worshipped as a god, but the shogun makes all the decisions. Power is here considered as a good in itself, not as a means to influence Policy. A simple way to model Power is as the number of decisions the Trustee is free to make. Here, let us denote it by $D$, an integer from 0 to $M$. In the modelling of Policy above, the Trustee was limited to one decision variable, $x$. We can easily make this a vector with $N \geq M$ elements, where $N$ could be larger than $M$ because it may be useful to model the Trustee as having preferences over some policy variables that he cannot possibly affect by his actions. Also, note  that we can keep the model simple by continuing to model Policy as unidimensional; this implies that the Trustee likes having more decisions to make because of Power, but he only cares about the outcome of one of them for Policy.

%---------------------------------------------------------------

 We can thus  write   the Trustee's utility function as \begin{equation} \label{e1} U_i = U( \frac{1}{(x -x_i)^2}, y_i, Z_i, D), \end{equation} with $U$ increasing in all its arguments.

       Let me now return to Pride. How does a Trustee improve his reputation for competence? That depends on the setting. Let us consider a central banker. One possibility is that he is rated on his ability to achieve his Policy, Place, and Power objectives. If that is so, then Pride will have  little independent effect, perhaps even having no effect on his decisions. A second possibility is that Pride depends only on how well he achieves one of the other objectives-- on his Power, for example, but not on his Policy. In that case, the effect of Pride is just to magnify the effect of Power relative to Policy and Place, increasing the importance of Power as an incentive tool.

A third possibility is the most interesting. Suppose the central banker's competence is rated on how close he comes to achieving the beneficiary's desired Policy.  This can be modelled as $$ y_i=\frac{1}{ (x-x^*)^2} $$

In the example of a central banker, the story would be that if the banker's personal preference is for 0 percent inflation, but the electorate's ex ante, informed preference  is for 10 percent, then the banker will not choose 0 percent, but rather something in between. If he chooses 0 percent inflation, people perceive his ability to be low-- they think that he tried for higher inflation, but couldn't manage to get what he wanted. The belief is self-confirming.

       Pride is interesting because  there are multiple equilibria in it. It all depends on what people think is the signal of ability. If the Settlor of the trust can set up expectations a certain way, he can use this tool to move the Trustee to the Settlor's preferred Policy and away from the Trustee's.

       The Four P's Theory also allows us to explain certain other aspects of central banking.    One question is why a central bank should have authority over banking regulation as well as over interest rates.  It is certainly desirable to have an independent Trustee supervising banking regulation, given the experience of the United States (and no doubt other countries) with elected officials pressuring regulators to go easy on  troubled and criminal banks.  But why  not set up a separate Trustee? The answer may be in  the central bank's love of Power.  In the United States, the Federal Reserve has resisted attempts to  take away the control it has over certain bank  regulations and rationalize regulation within a single agency.  An obvious explanation is the utility of Power.

    We can also explain the low salaries of Federal Reserve governors.  The salaries of Board members are set by Congress, and it may be advantageous to set them low.  This reduces the value of Place, and Board members commonly leave before their 14-year terms are up. They clearly have independence from Congressional bribery, and they do not   care  about reappointment  simply because the law forbids them to be reappointed-- an interesting aid to independence.      Moreover, there is a beneficial selection effect.  Paying public servants a low salary to attract only those with particular utility functions-- who wish to serve the public rather than earn money-- is an old idea, though usually applied to elected officials.  We have deliberately selected for Trustees who are unusually unresponsive to monetary incentives.

   The theory  has implications for the dimensionality of  central bank objectives.  A Trustee whose Trust has many objectives   has much greater discretion, since he can choose which objectives to favor. This allows  great scope for satisfying his personal Policy preferences (as we see with independent American federal judges, whose objectives have very high dimensionality, besides being quite vague).   If, on the other hand, the central bank is given one objective-- low inflation, for example-- it is much easier to monitor how it is doing, and much easier to  use Pride by  showing that the bank has failed to meet its formal objective.

       It is equally important to  give the Trustee only objectives which are under his control.   Ordering a central bank to  deliver  ``a healthy economy'' is futile. Moreover,  if some objectives are out of the bank's control, the banker already loses some utility from Pride,  or gains some from successes not really due to his own effort,   making it harder to use that instrument to control his behavior in more relevant areas. Combining the ideas of these last two paragraphs:  if the central banker has    10 targets,  of which only inflation is truly  under his control,   then inflation will be so small a part of his reputation that  he will use it to satisfiy his personal Policy preferences instead of to gratify his Pride by improving his reputation for effectiveness.

 I hope that these thoughts may be useful in organizing our thinking about government institutions.           The Four P's Theory hardly deserves the name of theory, since it has been largely taxonomic. I have, in fact, committed a sin of which I frequently accuse graduate students: constructing a model without coming to any propositions.   I hope  this taxonomy, though,  will be useful to shift from thinking of   agents  to thinking of trustees.   The shift of emphasis has quite different implications for how to structure their incentives.

  %---------------------------------------------------------------

\noindent {\bf Postscript}\\ To the other four P's, I must add a fifth, Principle. This is not quite the same as Policy, the P to which it is closest.  By  "Principle"  I mean a desire to take  a stand, regardless of whether taking a stand helps to achieve the desired end or not.   Suppose, for example, that a politician desires a 30 percent tax cut.  He could satisfy Principle, by holding out for 30 percent, knowing that the result will be no tax cut at all, or satisfy Policy, by compromising on a  10 percent tax cut. These are distinct goals.  In modelling terms, the Trustee obtains a Principle payoff from taking  a particular action; he obtains a Policy payoff from a particular event happening,  whether or not it happens because of his action.   The Policy goal is advanced, of course, by the Trustee's actions, but  he will be just as happy if the event happens without his intervention.

    Principle is very important for  judges.  A judge who tries to interpret the law according to original intent or plain meaning is motivated by Principle, and will often obtain Policies that he dislikes. Other judges are motivated by Policy, and  their decisions are  ``result-oriented'', independent of the laws they are supposedly interpreting.

      Central banking has less opportunity for divergence between Policy and Principle, but it still can arise. A central banker, might, for example, find that he could achieve more stable economic growth by doing favors for elected officials.  This would go against Principle, but  aid Policy. Corporate officers and literal trustees of charitable or other trusts could find themselves having to make similar tradeoffs with respect to bribes that would help their beneficiaries.

\bigskip

\noindent Compare independent contractors to agents and trustees.

\bigskip

\noindent Discuss motives and examples from corporate boards, politicians, charitably foundation boards, judges, parents. This could be the bulk of the paper.

\bigskip

\noindent What kind of contracts would one design for trustees? Maybe none at all. That is why the institutions are set up with trustees instead of agents. A contract could not cover the important stuff,and would fall into the multitasking fallacy of  Holmstrom \& Milgrom  (1991)-- of giving high-powered incentives for the unimportant tasks,leading to neglect of the important ones.

 Or maybe set up a contract based on the 5 P's and information release-- shaming poor performers. This would probably be an implicit contract, but it would be important for the trustee to know the implicit rules.

\bigskip

\noindent Trustees are typically highly subject to peer pressure. CEO's and ex-CEO's and judges, at least, think of themselves as a small, elite group, better than other people. That means they care less about opinion generally, but more about the opinion of their peers.

\bigskip

\noindent It may look like the law heavily constrains true trustees and corporate directors, since it has detailed rules for what happens in case of misbehavior. But this is misleading. Actually, the law only comes into play in extreme cases, and  is not felt as a binding constraint in most cases, no more than laws against theft are the main thing that stop agents from stealing, or that impeachment is the main constraint on a president or governor.

\bigskip

\noindent 
 What authority is given to individual trustees? Typically they have overseers. A corporation has a board of more than one director. A judge sits on a panel, or is a trial judge who can be overruled by a higher court. A legislator is one of many legislators. A  president or governor can be checked by the legislature or judiciary. Agents are more often left on their own.

\bigskip

\noindent 
 A formal model really is needed, to cmopare principal-agent with settlor-trustee-beneficiary. Include assets in the model. 



\newpage

  \begin{center} REFERENCES \end{center}



 Alchian, Armen \& Harold Demsetz, Production,
Information Costs, and Economic Organization, 62 Am. Econ. Rev. 777  (1972). 





American Law  Institute (1958) {\it   Restatement of the Law, Second: Agency} (St. Paul, Minnesota: American Law Institute, 1958).

American Law  Institute (1959) {\it   Restatement of the Law, Second, Trusts} (St. Paul, Minnesota: American Law Institute, 1959).

 Bainbridge, Stephen (2002) {\it Corporate Law and Economics}  (2002).


 Barro, Robert and D. Gordon (1983) ``A Positive Theory of Monetary Policy in a Natural Rate Model,'' {\it Journal of Political Economy}, 91: 589-610.

 Cassidy, John  (1996) ``Fleeing the Fed: Why Did Bill Clinton's Appointee Leave Alan Greenspan?'' {\it The New Yorker}, Feb. 19, 1996, pp.   38-46.

 Clark, Robert C. (1985) ``Agency Costs versus Fiduciary Duties,''  55, in John W. Pratt \& Richard J. Zeckhauser,
eds., Principles and Agents: The Structure of Business 55 (1985);


Cooter, Robert (1983)  ``The Objectives of Private and Public Judges,''   {\it Public Choice}, 41: 107-132.

 Driffill, John (1997) ``Institutions and Monetary Policy,'' Working paper, Dept. of Economics, University of Southampton, October 8, 1997. Www.soton.ac.uk./$\sim$econweb.

 Fama,  Eugene F. \& Michael C. Jensen, Separation of Ownership and Control, 26 J. L.
\& Econ. 301 (1983).

 Fama,  Eugene F. \& Michael C. Jensen, Agency Problems and Residual Claims, 26 J.
L. \& Econ. 327 (1983).

 Fama,  Eugene F. (1980)  Agency Problems and the Theory of the Firm, 88 J. Pol. Econ.
288 (1980). 


  Frey, Bruno (1997)  {\it Not Just for the Money: An Economic Theory of Personal Motivation}  (Elgar, 1997).

Gely, Rafael and        Pablo Spiller  (1990)   ``A Rational Choice Theory of Supreme Court Statutory Decisions with Applications to the {\it State Farm} and {\it Grove City} Cases,''   {\it Journal of Law, Economics, and Organization},  6: 263--300.

Goodhart, Charles (1995) {\it The Central Bank and the Financial System}, (London: MacMillan Press, 1995).

Goodhart, Charles   and Haizhou  Huang (1995) ``What is the Central Banks' Game?'' Working paper, Financial Markets Group, London School of Economics, Huang@lse.ac.uk.



 Hansmann, Henry B.
Reforming Nonprofit Corporation Law, 129 U. Pa. L. Rev. 497.


  Hansmann, Henry B. \& Reinier Kraakman, The Essential
Role of Organizational Law, 110 Yale L. J. 387  (2000).

 Hansmann, Henry B. \& Ugo Mattei, The Functions of Trust Law: A Comparative Legal and
Economic Analysis, 73 N.Y.U. L. Rev. 434  (1998).


Holmstrom, Bengt \& Paul Milgrom (1991)  ``Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design,'' {\it Journal of Law, Economics  and Organization}, 7: 24-52 (Special Issue, 1991).





Hart, Oliver  An Economist’s View of
Fiduciary Duty, 43 U. Toronto L. J. 199 (1993);

 Jensen,  Michael C.  \& William H. Meckling, Theory of the Firm: Managerial Behavior, Agency
Costs, and Ownership Structure, 3 J. Fin. Econ. 305 (1976), reprinted in Michael C. Jensen, Foundations
of Organizational Strategy 51. 

Landes, William  \& Richard Posner.  1975.  ``The Independent Judiciary in an Interest-Group Perspective,''   {\it Journal of Law and Economics}, 18: 875-901.



 Langbein, John H. ``The Contractarian Basis of the Law of Trusts,'' 105 Yale L. J. 625 (1995).

 




Macey,Jonathan   Private
Trusts for the Provision of Private Goods, 37 Emory L. J. 295  (1988).



Manne, Geoffrey A. (1999)  ``Agency Costs and the Oversight of Charitable Organizations,'' 1999 Wisc. L. Rev. 227.

 


 Merrill,  Thomas W. \& Henry E. Smith, The
Property/Contract Interface, 101 Colum. L. Rev. 773  (2001).






 Miller, Geoffrey (1997) ``An Interest-Group Explanation of Central Bank Independence,'' working paper, New York University Law School.


 Ogus, A.I.  The Trust as Governance Structure, 36 U. Toronto L. J. 186 (1986).






   Posner, Richard (1994)    ``What do Judges and Justices Maximize?   The Same Thing Everybody Else Does),''   chapter 2 of {\it Overcoming Law}.   Also, {\it Supreme Court Economic Review}  3:1-42 (1994).

Ramseyer, J. Mark  (1994)  ``The Puzzling (In)Dependence of Courts:  A Comparative Approach,''    {\it Journal of  Legal Studies},   23: 721-47.

Ramseyer, J. Mark   and  Eric Rasmusen (1997)  ``Judicial Independence in Civil Law Regimes: Econometrics from Japan,`'       {\it Journal of Law, Economics, and Organization,  } 13: 259-286.

Ramseyer, J. Mark   and  Eric Rasmusen (2003) {\it Measuring Judicial Independence: The Political Economy of Judging in Japan},  University of Chicago Press, 2003.

 Rasmusen, Eric (1992) ``An Income-Satiation Model of Efficiency Wages,'' {\it Economic Inquiry} (July 1992) 30: 467-478.

 Rasmusen, Eric (1994)  ``Judicial Legitimacy: An Interpretation as a Repeated Game,'' {\it Journal of Law, Economics, and Organization},  10: 63-83 (April 1994) .

 Rasmusen, Eric (1997) ``A Theory of Trustees, and Other Thoughts,'' in  Public Debt and its Finance in a Model of a Macroeconomic Policy Game: Papers Presented at a Workshop held in Antalya, Turkey on October 10- 11, 1997, , ed. by Tahire Akder. 63-83.

 Rasmusen, Eric and  Jeffrey Stake  (1998)   ``Lifting the Veil of Ignorance: Personalizing the Marriage Contract,''      {\it Indiana Law Journal},  73: 454-502 (Spring 1998).

Rasmusen, Eric (2004)  ``The Economics of Agency Law and Contract Formation,'' {\it American Law and Economics Review},  6,2: 369-409 (Fall 2004)

 Rogoff, Ken (1985) ``The Optimal Degree of Commitment to an Intermediate Monetary Target,'' {\it Quarterly Journal of Economics}, 100: 1169-1190.

 Rousseau, Jean-Jacques (1761) {\it The Social Contract},  tr. ,  Maurice Cranston (Baltimore: Penguin Classics, 1968).


 Sitkoff, Robert H.  (2004)
``An Agency Costs Theory of Trust Law,''  {\it Cornell Law Review},   89,  ( 2004).
 

 


Spiller, Pablo   \& Rafael Gely.  1992.  ``Congressional Control or Judicial Independence:  The Determinants of U.S. Supreme Court Labor-Relations Decisions, 1949- 1988,''    {\it RAND Journal of  Economics},   23: 463-92.

  Thomas, Lloyd (1997) {\it Money, Banking, and Financial Markets} (New York: McGraw- Hill, 1997).

  Walsh, Carl  (1995) ``Optimal Contracts for Central Bankers,''  {\it American Economic Review}, 85: 150-167.

\end{raggedright}

\end{document}

