Public Services and the Theory of Regulation

This paper examines how principal-agent theory, as used in the industrial regulation literature, might be useful in analysing the organisation and provision of public services and to evaluate recent reforms. An exposition of the key issues in regulation is provided, at a fairly intuitive level, and brief examples illustrate how these might be relevant to public service provision such as education and health services. It is argued that principal-agent theory provides a useful framework of analysis for such studies.