regulatory capture

Regulatory Capture, of de 'Gevangen Regelgever' - Bert Hubert's writings

2 months ago

Regulatory capture occurs when a regulator begins to see issues from the perspective of the industry it oversees, leading to helpful regulation for the industry but not for society.
This can happen without any explicit corruption, as employees may not feel they are being bribed or acting unethically.
Effective oversight should prevent problems with minimal friction, but a 'mutually optimal' situation where regulators and industry are both satisfied may not benefit society.
Regular contact between regulators and industry, such as through job exchanges, can lead to a blending of perspectives and biased oversight.
The food industry example shows how regulators may defend industry practices (e.g., high sugar content) by shifting blame to consumers (e.g., lack of exercise).
The auto industry example illustrates how standardized crash tests can lead manufacturers to focus on passing specific tests rather than improving actual safety.
Other examples include construction and banking, where regulation can be used to limit competition or focus on less painful issues.
Regulatory capture is often denied, but recognizing its existence is the first step; simple solutions like term limits may not work effectively.
A captured regulator can be worse than no regulation, as it wields government authority to legitimize harmful behavior.