The process of checking whether individuals or firms are actually behaving as they should. This applies to seeing whether laws imposed by the government are being obeyed; whether instructions issued by regulatory agencies to firms are being complied with; whether orders by employers to their employees are actually being carried out; and whether the other party is complying with the terms of a contract. Monitoring is necessary because it may not be in the private interest of firms to obey laws and regulations, or in the private interests of employees to obey their employers. Monitoring is expensive: in designing laws and issuing private orders there is a trade-off between desirable aims and the level of monitoring costs.