Regulatory Capture Definition With Examples

Regulatory capture is a process by which regulatory agencies may come to be dominated by the industries or interests they are charged with regulating. The result is that an agency, charged with acting in the public interest, instead acts in ways that benefit incumbent firms in the industry it is supposed to be scrutinizing. Regulatory capture, also known as “the economic theory of regulation” or simply “capture theory,” was introduced to the world in the 1970s by the late George Stigler, a Nobel laureate economist at the University of Chicago. Stigler noted that regulated industries maintain a keen and immediate interest in influencing regulators, whereas ordinary citizens are less motivated. As a result, even though the rules in question, such as pollution standards, often affect citizens in the aggregate, individuals are unlikely to lobby regulators to the degree that regulated industries do. 1 Regulated industries devote large budgets to influencing regulators at federal, state, and

Regulatory capture is a process by which regulatory agencies may come to be dominated by the industries or interests they are charged with regulating. The result is that an agency, charged with acting in the public interest, instead acts in ways that benefit incumbent firms in the industry it is supposed to be scrutinizing. Regulatory capture, also known as “the economic theory of regulation” or simply “capture theory,” was introduced to the world in the 1970s by the late George Stigler, a Nobel laureate economist at the University of Chicago. Stigler noted that regulated industries maintain a