Everything about Regulatory Capture totally explained
Regulatory capture is a phenomenon in which a
government regulatory agency which is supposed to be acting in the public interest becomes dominated by the vested interests of the existing incumbents in the industry that it oversees.
In
public choice theory, regulatory capture arises from the fact that vested interests have a concentrated stake in the outcomes of political decisions, thus ensuring that that'll find means - direct or indirect - to capture decision makers.
The concept is central in a branch of public choice that's often referred to as the "economics of regulation", which is critical of earlier conceptualizations of regulatory intervention by governments as being motivated to protect
public goods. Two often cited articles are Laffont & Tirole (1991) and Levine & Forrence (1990).
The theory of regulatory capture is associated with Nobel laureate economist
George Stigler, one of its main developers.
Economic Rationale
The idea of regulatory capture has an obvious economic basis in that vested interests in an industry have the greatest financial stake in regulatory activity and are likely to be less hindered by
collective action problems that might riddle those affected by regulation (like dispersed consumers each of whom has little particular incentive to try to influence regulators). As well, we'd expect that when regulators form
expert bodies to examine policy, this will invariably feature current or former industry members, or at the very least, individuals with contacts in the industry.
Examples
Historians, political scientists, and
economists have used the
Interstate Commerce Commission (ICC), a federal regulatory body in the
United States, as a classic example of regulatory capture. The creation of the ICC was the result of widespread and longstanding anti-railroad agitation, but the Commission was later accused of acting in the interests of railroads and trucking companies. The ICC, they claimed, set rates at artificially high levels and excluded new competitors through a restrictive permitting process.
Further Information
Get more info on 'Regulatory Capture'.
|
External Link Exchanges
Do you know how hard it is to get a link from a large encyclopaedia? Well we're different and will prove it. To get a link from us just add the following HTML to your site on a relevant page:
<a href="http://regulatory_capture.totallyexplained.com">Regulatory capture Totally Explained</a>
Then simply click through this link from your web page. Our crawlers will verify your link, extract the title of your web page and instantly add a link back to it. If you like you can remove the words Totally Explained and embed the link in article text.
As long as your link remains in place, we'll keep our link to you right here. Please play fair - our crawlers are watching. Your site must be closely related to this one's topic. Any kind of spamming, dubious practises or removing the link will result in your link from us being dropped and, potentially, your whole site being banned. |
