My comment on Chris Dixon’s post discussing the Internet and principal-agent problems:
In addition to incentives, one of the primary factors underlying principal-agent divergence are information asymmetries.
Mitigating those information asymmetries is something the internet is very good at. e.g.. widely available price information drives prices toward marginal cost and makes it less likely we are ripped off; kickstarter, etsy, sidetour, github, behance, kaggle and other talent elevation platforms can make it easier to find authentic talent instead of relying on mediating people or shortcuts such as resumes or various brand names; opinion creation by bloggers instead of just talking heads, etc..
By mitigating them, networks instead of institutions largely get “more efficient” results, e.g., lower prices, recognition of better talent, a more accurate reflection of views in society, etc.