Yet if the takeover means that the workers tending the presses see smaller rewards for their efforts, and their managers cannot keep tabs on them, they might shirk the extra sorts of work that keep the presses running as productively as possible.
So the theory has real-world relevance; Mr Hart used it to explain precisely why inmates may fare worse at privately run prisons than at public ones.
Managers of both care about the bottom line, but the incentive to cut costs is sharper in private prisons, because the profits flow into the pockets of owners who benefit directly.
The work of Mr Holmstrom, a Finnish economist at the Massachusetts Institute of Technology, centres on the behaviour of individuals rather than organisations.
Many of the basic power dynamics in society boil down to the relationship between one person—a principal—who needs another—an agent—to do something for him.
The principal can use contracts to shape the incentives facing the agent, the better to get him to direct his activities.
Yet getting the incentives just right is no easy feat.
A firm owner setting pay for a senior manager wants to get his employee to deliver the best possible results.
Linking a bonus to performance—to profits, for example—would seem to be the order of the day.
Yet profits rise and fall for reasons which have nothing to do with managerial effort, such as the health of the economy.
Bonus payments that mostly reward this sort of noise actually dull the incentives facing the manager.
Better to base contracts only on information (like profits relative to the industry average) which sheds light on the manager’s true performance.
最好将契约只建立在彰显出管理人员真正业绩的信息 (如相对于行业平均水平的利润) 的基础之上。
Yet surprisingly often, firms opt not to structure pay in this way.
Mr Holmstrom’s work describes why that might be so.
Most jobs are made up of many different tasks, for instance, some of which are easier to assess than others.
Bonuses linked to the easily measured stuff, like profits, encourage agents to spend more time boosting those measures, at the expense of other, harder-to-measure things that are nonetheless important, like brand reputation or product quality.
In some cases, firms might therefore opt to pay fixed salaries, or to separate roles into those specialising in the easy-to-assess tasks, who can be offered high-powered incentive pay, and others paid fixed rates for woollier sorts of work.
Throughout his career, Mr Holmstrom has worked out how the ways contracts can and cannot be made to manipulate others determine the structure of jobs, firms and even industries.
Like many of the most deserving laureates, Mr Hart and Mr Holmstrom opened whole new lines of inquiry to later economists (indeed, the winner of the prize in 2014, Jean Tirole, did important work in response to their contributions) .
The Nobel committee should be applauded for rewarding economists who place power dynamics front and centre.
Economic life is messy, but it is also, occasionally, comprehensible.