Regulatory Capture


A timely topic five years ago, now seldom mentioned as our focus is on our politician's ideology rather that the equally important regulatory agencys whos action and control go unnoticed let alone unregulated..


Regulatory capture is a form of government failure that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or political concerns of special interest groups that dominate the industry or sector it is charged with regulating. When regulatory capture occurs, the interests of companies / industry or political groups are prioritized over the interests of the public, leading to a net loss to society as a whole. Government agencies suffering regulatory capture are called "captured agencies".


For example. The Security and Exchange Commission (SEC) refused to investigate Bernie Madoff for ten years even though it had been repeatedly warned Madoff's financial statements did not make sense. Net Neutrality is another perfect example of regulatory capture as is the Pharmaceutical Industries control over the field of Oncology. (Ever wonder why there has been no cure for cancer). Many more examples are mentioned in the broadcast linked below.


The bottom line When regulatory capture exists, the interest of political groups or companies become more important than those of the public, which leads to a net loss to society.


If you are having problems because the wolves keep eating the sheep, 

perhaps setting up an agency might help protect those sheep. 

However, you have a problem if the only individuals qualified 

to become agency members are also wolves.


When people clamor for "more regulation", it means nothing if the companies being regulated are the ones running the regulatory agency. In fact, this gives them an opportunity to further consolidate their monopolies via government enforcement. They can create rules only their monopoly can follow. They can ensure every government contract only goes to them.


This is why the whole conversation of liberal "more regulation" vs conservative "less regulation" is a complete red herring. It matters not how much regulation there is if the people running the regulatory bodies are completely corrupted. Republicans assume corruption is the default, so they want to get rid of regulations but are not opposed to corruption within it because they see it as inevitable. Whereas Democrats assume the companies need more limitations so they're in favor of stronger regulations, without realizing the widespread existence of regulatory capture. Both are right in certain respects, but there's so much conversation about "less vs more" when in fact we should be looking at who is doing all this regulating? This is fact conveniently often overlooked.


Below is an audio segment on Regulatory Capture as part of a recent radio broadcast.



The Graphic shown here (mentioned in above broadcast) shows the overlap of government employees from industry who have become lobbyist after leaving their job.