Economics in Game of Thrones: The Principal Agent Problem
Joffrey and Daenerys learn how to rule their subjects
What are the economic lessons we can learn from Game of Thrones and House of the Dragon? We will examine different economic lessons each week during season 2 of House of the Dragon’s release this summer through these posts and through the corresponding YouTube videos. (Linked at the bottom.)
In this episode, I’m joined by Dan Bragen. Dan graduated from Susquehanna University in 2024 and is a Ph.D. student at Clemson University.
The Principal Agent Problem
The Principal-Agent Problem refers to misaligned incentives and bad decisions that arise when one person/entity (the "agent") takes actions on behalf of another person/entity (the "principal"). It isn’t easy, as the agent often have incentives that are wildly different from the principal. It often occurs in situations where a person is hired, as a boss will have different incentives than a worker. In Game of Thrones we see two times the leaders deal with the principal agent problem.
Joffrey Struggles to Control the North
In the first clip, we see that King Joffrey and Cersei aren’t sure what they should do about Northerners. They are the rulers, but the Northerners have their own agenda and they are so isolated they can’t be completely controlled given the lack of oversight. This is a classic example of a principal agent problem.
Daenerys Uses Dragons to Rule
Daenerys also rules, but she has a key asset - her dragons. Anyone who chooses not to help her would almost certainly face instant death. Given this, she does not face the same problem that Joffrey faced.