I absolutely loved this quote about the dangers of regulatory capture from Holman Jenkins in today’s Wall Street Journal in a story (“Let’s Restart the Green Revolution“) about how misguided agricultural / environmental policies are hurting consumers:
When some hear the word “regulation,” they imagine government rushing to the defense of consumers. In the real world, government serves up regulation to those who ask for it, which usually means organized interests seeking to block a competitive threat. This insight, by the way, originated with the left, with historians who went back and reconstructed how railroads in the U.S. concocted federal regulation to protect themselves from price competition. We should also notice that an astonishingly large part of the world has experienced an astonishing degree of stagnation for an astonishingly long time for exactly such reasons.
I’ve just added it to my growing compendium of notable quotations about regulatory capture. It’s essential that we not ignore how — despite the very best of intentions — regulation often has unintended and profoundly anti-consumer / anti-innovation consequences.
Have we technophiles utterly deluded ourselves? Worse, instead of enjoying an Age of Innovation, are we actually stuck in a technological Dark Age? One that explains our stagnating living standards and general economic “disarray”? This is the possibility economist Tyler Cowen (George Mason, Marginal Rev, Mercatus) raises in
The Great Stagnation, a pithy and provocative new e-book essay. Here is my Forbes column on the topic: “Tyler Cowen’s Techno Slump.” I don’t know how much I agree with Cowen, but I think he’s given a big boost to an important conversation.
[Note: This post is updated regularly as I discover relevant old or new material.]
“Regulatory capture” occurs when special interests co-opt policymakers or political bodies — regulatory agencies, in particular — to further their own ends. Capture theory is closely related to the “rent-seeking” and “political failure” theories developed by the public choice school of economics. Another term for regulatory capture is “client politics,” which according to James Q. Wilson, “occurs when most or all of the benefits of a program go to some single, reasonably small interest (and industry, profession, or locality) but most or all of the costs will be borne by a large number of people (for example, all taxpayers).” (James Q. Wilson,
Bureaucracy, 1989, at 76).
While capture theory cannot explain all regulatory policies or developments, it does provide an explanation for the actions of political actors with dismaying regularity. Because regulatory capture theory conflicts mightily with romanticized notions of “independent” regulatory agencies or “scientific” bureaucracy, it often evokes a visceral reaction and a fair bit of denialism. (See, for example, the reaction of New Republic’s Jonathan Chait to Will Wilkinson’s recent Economist column about the prevalence of corporatism in our modern political system.) Yet, countless studies have shown that regulatory capture has been at work in various arenas: transportation and telecommunications; energy and environmental policy; farming and financial services; and many others.
I thought it might be useful to build a compendium of quotes from various economists and political scientists who have studied the regulatory process throughout history and identified regulatory capture or client politics as a major problem. I would greatly appreciate having others suggest additional quotes and studies to add to this list since I plan to update it frequently and eventually work all of this into a future paper or book. [
Note: I have updated this compendium over a dozen times since the original post, so please check back for updates.]
The following list is chronological and begins, surprisingly, with the thoughts of progressive hero Woodrow Wilson…
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