Regulatory Capture Theory

Topics: Regulation, Administrative law, Regulatory agency Pages: 4 (1036 words) Published: October 18, 2014
REGULATORY CAPTURE THEORY
Capture theory assumes, firstly, that all members of society are economically rational. Therefore, each individual will pursue his or her self-interest to the point where the private marginal benefit from lobbying regulators just equals the private marginal cost. Regulation has the potential to redistribute the wealth. Therefore, people lobby for regulations that increase their wealth. Second, the capture view assumes, as with public-interest theory, that the government has no independent role to play in the regulatory process, and that interest groups battle for control of the government’s coercive power to achieve their desired wealth distribution.

Thus capture theorist maintain that while the purpose in fact or origin of regulation is to protect the public interest as discussed above, this purpose is not achieved because in the process of regulation, the regulate comes to control or dominate the regulator. That is the capture view singles out regulated entities as prevailing in the struggle to influence legislation. It predicts a regular sequence, in which the original purpose of a regulatory program are later thwarted through the efforts of the interested group. Capture is said to occur in any one of four situation- namely if the regulated entities: 1. Control the regulation and the regulatory agency

2. Succeed in coordinating the regulatory body's activities with their activities, so that their private interest is satisfied 3. Neutralize or insure nonperformance (or mediocre performance) by the regulating body 4. In a subtle process of interaction with the regulators, succeed in coopting the regulators into a mutually shared perspective, thus giving them the regulation they sought. Regulatory agency capture involves capture of the administration, implementation and, to a large degree, the evaluation of the effects of the policy process within any regulated area. It has been found to be especially pronounced where the following...
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