1)What economic issue(s) or problem(s) does Gibbons emphasize in his 1998 NBER paper?

A. The ineffective or counterproductive results of applications of the classic agency model of incentives in organizations as noted by such observers as Kerr ("you get what you pay for").

B. The over-emphasis of classic agency incentive models on the trade-offs between insurance and incentives.

C. The need to address subjective aspects of incentive models in light of the difficulty of measuring contribution or output (y).

D. All of the above.

The correct answer is D. All of the above.

In the NBER paper published by Robert Gibbons, the agency theory is analyzed. The main point of discussion on this paper is the real incentives in organizations. In the very first paragraphs, Gibbons criticizes the argument of Steven Kerr about "you get what you pay for". Subsequently, Gibbons also talks about the obsession of the agency theory with the trade-offs between insurance and incentives. He points out that there are clearly more important issues than that. Furthermore, Gibbons states that objective performance measures are often a bad way to create incentives, so the role of subjective performance assessments is essential to take into account to pay the total contributions of the agent.