Economic Analysis of Agency Law – Episode 4: Rules Scaffolding Trust

In Episode 4 of Season 3, Professor Seth C. Oranburg delves into fiduciary duties—the economic tools that underpin agency relationships. In this episode, he explains how these core obligations—duty of care, duty of loyalty, and duty of obedience—work to build trust, reduce transaction costs, and mitigate uncertainty in delegation. Using the whimsical metaphor of Hotch Hotch, where a beleaguered mayor implements fiduciary duties to rein in overzealous Watchers, Professor Oranburg illustrates how clear expectations and aligned incentives can stabilize agency relationships. However, he also shows that fiduciary duties aren’t a magic fix; they must be maintained alongside good judgment, effective communication, and proper enforcement mechanisms. Tune in to explore how fiduciary duties serve as the invisible scaffolding that holds up agency law, and learn why breaches—even with robust duties—can still incur costly economic and legal consequences.