Principle-Agent & The Security Contractor

DominoWarPrivate military contractors and private security companies are oft maligned for their involvement with the campaigns in Iraq and Afghanistan. This criticism is justified to the degree that they were violently carrying out failed foreign policies and misguided interventions. As the supposed need for renewed foreign military intervention arises once more in Iraq, military contractors are being employed to do the work unpalatable to national armies and American voters. Since the mission of intervening into a conflict with no security interests to the average American is flawed, the results will inevitably lead to perverse, unintended consequences. One of which is the repeated demonization of the companies lured to the melee in search of profit. These deprecations are misdirected at symptoms, rather than the causes of misguided aggression.

Entrepreneurs respond to incentives and the discovery of profit making opportunities are information signals that make a market ecosystem function for the continued satisfaction of consumer desires. Securing people and their property is a legitimate service carried out for the increases it brings to the division of labor and the specialization of trade. Secure in their person and property, individuals and collaborating groups are better able to transform resources into consumer goods that elevate social well-being.

Security specialists create the space necessary for others to do their own productive work. Consumers exchange money with the security provider to show their appreciation for the secure space they enjoy, rendered by this service. In this way, the private security company is a net benefit to society and the remuneration for this service should attract other entrepreneurs to specialize in this field, thereby reducing the cost as suppliers of this service increase. As with all products and services, a free market for security naturally trends toward an increase in security at ever decreasing costs; another net benefit.

The security industry becomes perverted by distortions in the relationship between the customer and the provider. This is the classic principle-agent conundrum, whereby the provider, acting as the agent of the customer, or principle, carries out activities contrary to their agreement. The agent may take money from the principle and instead of securing the principle’s interests, spend their time doing something else. The provider could accept money to secure one location, but then abandon that post in order to secure another piece of property, or carry out a pet project of their own. The agent could also exceed their mandate by operating outside their assigned area and create conflict with a third party, in the name of the principle.

All of these problems could, of course, arise in a free market for security, yet would hardly last long since the principle retains the right to sever the relationship with the agent for violating the terms of their agreement. Further, the principle could withhold payment from the agent and/or recoup funds already given. The principle is, of course free to seek the security services of another provider available in the vast marketplace and the reputation of wayward agent rightfully would sink from word of their past transgressions. In this way, the freedom to choose acts as a healthy clearing mechanism for regulating the behavior of security providers.

Correctly diagnosing the unintended consequences of private military companies employed in foreign interventions, requires seeing the root of the problem: the interjection of a political middle-man between the principle and agent, along with the restrictions placed upon the self-regulating security marketplace.

Don’t hate the players; hate the rigged game they’re playing in.

About The Jade(d) Warrior

Decades of walking the path of the warrior in service to noble ideals leaves one, well...jaded.
This entry was posted in Economics, Geopolitics, Military and tagged , , , , . Bookmark the permalink.

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