Definition
Plain language
The basic tension that shows up when one party hires another to act for them and the worker's incentives don't perfectly match the boss's.
As stated in the literature
An economics framework analyzing incentive misalignment when a principal delegates to an agent whose effort or information is imperfectly observable; invoked to explain why LLM agents optimize the measurable channel (verbal output) over the unmeasured one (actual procedure compliance).
Also called: principal-agent
Why it matters: It explains why a delegated worker, including an AI agent, tends to optimize what's being measured rather than what the boss actually wants.
For example, a homeowner hires a contractor who knows the homeowner can't watch every hour, so the contractor may cut corners where it won't be noticed.
Heard on the show
“It's the principal-agent problem in everyday clothes.”Episode 020 — The Compliance Gap: Why AI Says Yes and Does No