Rather, the target is the Clean Air Act. The target is the law protecting people with preexisting conditions from being denied health insurance. The target is the regulatory bulwark against abuses by the financial services industry, in order to prevent Wall Street from destabilizing the economy.
In each of these cases, captured regulatory agencies failed to protect the American people. Regulatory capture also assaults democratic government. Regulations to enforce those laws implement that public interest.
All is well—until industries co-opt those regulatory agencies. Policymakers and academics have long recognized the challenges that regulatory capture poses. Although the problem of capture can seem intractable, at a U. Senate Judiciary Subcommittee hearing I chaired several years ago, I found broad bipartisan agreement on a number of propositions.
Specifically, everyone conceded the following points :. Second, the enormous stakes involved for regulated entities create an incentive to gain influence over regulators. Third, most regulated entities have organizational and resource advantages in the regulatory process, as compared to public interest groups that represent a more diffuse public interest.
Fourth, regulatory processes can be gamed by regulated entities, allowing them undue control over regulation. Fifth, regulatory capture by its nature happens in the dark, a process that transpires as invisibly as possible.
And finally, effective congressional oversight can keep regulators focused on the public interest and can defend against capture. Specifically, there is virtually zero government effort to systematically identify, prevent, and root out regulatory capture. As a matter of good government, this is a problem that must be addressed. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.
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Your Practice. Popular Courses. What Is Regulatory Capture? Key Takeaways Regulatory capture is an economic theory that regulatory agencies may come to be dominated by the interests they regulate and not by the public interest. The result is that the agency instead acts in ways that benefit the interests it is supposed to be regulating.
Industries devote large budgets to influencing regulators, while individual citizens spend only limited resources to advocate for their own rights.
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In industries that serve critical needs, it is tempting to turn to regulation as a method of protecting consumers and promoting competition. New rules and regulations are costly to comply with, which often means that only the largest companies can afford them. Consequently, regulators actually end up advancing the interests of the companies they are regulating by imposing disproportionate new costs on their competitors.
After the financial crisis, Dodd-Frank was passed to rein in the biggest banks and prevent future abuses.
But this law in its original form also made it much more difficult for new banks to enter the market and compete with bigger banks. The unintentional result is a less competitive and more consolidated market that makes consumers worse off. But it must always be balanced against the potential to harm the consumers it is intended to protect. View the discussion thread.
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