The Capture Theory of Regulations-Revisited

Amidst the rekindled interest in regulating the market that has emerged since the 2008 financial crisis, most attention has been paid to the debate between those who call for more regulation of the private sector in order to protect the public good, and those who claim that such regulations would do further damage to the economy by unduly constraining business. This essay seeks to refocus the debate about regulation by examining an alternative criticism-the theory of regulatory capture-which argues that regulations are routinely and predictably 'captured' and manipulated to serve the interests of those who are supposed to be subject to them, or the bureaucrats and legislators who write or control them. Ample evidence suggests that regulatory capture is indeed widespread and takes a variety of forms, which are reviewed here. Rather than debating whether more or less regulations are needed, the paper suggests that what is needed is a way to make regulations stronger-more capture-proof It closes with a major policy change that would help accomplish this goal.