Regulatory capture

Neutralization of regulatory agencies
Captured agents of state regulation

Nature

Regulatory capture is a form of government failure in which regulatory agencies, established to act in the public interest, become dominated by the industries or interests they are charged with regulating. This results in policies and decisions that favor industry interests over public welfare, undermining the agency’s original purpose. Regulatory capture can lead to weakened regulations, reduced enforcement, and increased risk of corruption, ultimately eroding public trust and allowing harmful practices to persist. It is widely recognized as a significant problem in sectors such as finance, energy, and healthcare, where industry influence over regulators can have broad societal impacts.

Background

Regulatory capture emerged as a recognized global concern in the mid-20th century, notably through the work of economist George Stigler in the 1970s, who highlighted how regulatory agencies could be dominated by the industries they oversee. Subsequent investigations, such as those into financial crises and environmental disasters, revealed the widespread and persistent nature of this phenomenon, prompting international discourse on the vulnerability of public institutions to private interests across diverse sectors and jurisdictions.

Incidence

Regulatory capture is a persistent issue affecting diverse sectors worldwide, including finance, energy, pharmaceuticals, and environmental regulation. Its incidence is evident in both developed and developing countries, where regulatory agencies often become influenced by the industries they are meant to oversee. This undermines public trust, distorts policy outcomes, and can lead to significant economic and social costs, as seen in repeated scandals and investigations across multiple jurisdictions.
In 2021, the U.S. Federal Aviation Administration faced scrutiny after investigations revealed close ties with Boeing during the certification process of the 737 MAX aircraft, raising concerns about compromised regulatory oversight and public safety.

Claim

As soon as you allow regulators to determine that which is bought and sold, the first thing bought and sold will always be regulators (and they're cheaper than politicians).

Counter-claim

Regulatory capture is vastly overstated as a concern. Most regulators act with integrity, and the checks and balances in place prevent undue industry influence. The idea that agencies are routinely "captured" is more conspiracy than reality, distracting from genuine policy debates. Focusing on regulatory capture wastes time and undermines public trust in institutions that, by and large, serve the public interest effectively and responsibly. It's simply not a significant problem.