“Regulatory capture” does not mean “the concept of big businesses owning regulators”. It is, rather, a specific proposed explanation for why this takes place, and why it is likely to take place: namely, people working for and invested in a regulated industry have a greater interest in the outcome of regulation than other citizens do, and therefore are likely to expend more effort to influence the regulators.
Notably, regulatory capture does not explain “big business owning regulators” in terms of the members of either big business or regulatory agencies being unusually selfish, evil, or corrupt individuals. It predicts that you can’t fix regulation by installing more honest or virtuous regulators, because the problem is structural rather than personal.
Here’s an example:
I, as a human citizen who likes breathing air without radioactive soot in it, have an interest in shutting down coal-fired power plants. However, the magnitude of my interest in shutting them down is much less than the magnitude of a coal plant employee (especially a well-paid one who is also a shareholder!) in keeping that plant running. Coal soot slightly increases my chance of lung cancer … but shutting down coal plants puts those people out of a job, which is much worse for them than the delta in lung cancer probability is for me. Therefore, any given “coal person” can be expected to spend much more effort on influencing regulators than I will. And if influence is proportional to effort, this means the EPA will tend to favor the views of the coal people and not my views.
However, that said, regulatory capture is part of a broader theory in political economy called public choice theory. And public choice theory has been criticized as not being very predictive; of not having very much in the way of empirical success. Beware the mind-killers, especially when they agree with you!
“Regulatory capture” does not mean “the concept of big businesses owning regulators”. It is, rather, a specific proposed explanation for why this takes place, and why it is likely to take place: namely, people working for and invested in a regulated industry have a greater interest in the outcome of regulation than other citizens do, and therefore are likely to expend more effort to influence the regulators.
That’s not how I was using the term. I was using it as a label for a fact—that over time, the industry being regulated by an agency tends to eventually take over that agency. Public choice economics, whatever it’s limitations, is trying to explain this fact. Note that my usage is consistent with wikipedia (link in parent and grandparent):
In economics, regulatory capture occurs when a state regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating.
For public choice theorists, regulatory capture occurs because groups or individuals with a high-stakes interest in the outcome of policy or regulatory decisions can be expected to focus their resources and energies in attempting to gain the policy outcomes they prefer, while members of the public, each with only a tiny individual stake in the outcome, will ignore it altogether.
It usually goes without saying, but we assume for such examples that the aggregate harm done over all parties is higher than the aggregate good.
The problem here is that the expected utility of acting against coal plants is too small to be worth doing at all. That is, once we solve microtransactions (in practice, rather than in theory), this problem may be much more tractable.
The problem here is that the only institution that does have an interest in the long-term health of the entire population and does have the ability to overrule the interests of the coal plant owners—the state—is crippled under a liberal democracy because its members only have an interest in being re-elected.
Actually I think the state’s interest in the long-term health of the population isn’t really an enduring feature, its more of a plausibly useful strategy.
A state can reasonably defined as a local monopolist of violence, generally speaking its long term interest is basically to maintain that monopoly. There are imaginable scenarios where this involves hurting the long-term health of its entire population if say the result makes the population more docile or if they improve rent extraction that the state needs to maintain its monopoly ect.
Its even possible to imagine stable states that hurt the long-term health of their citizens so much that they die too fast for fertility to compensate, or rather infertility rates rise until they are sub replacement. Since its easy to import new workers (who may or may not be citizens). The obvious example of this seems to be places where the state relied on the slave owning class and the nature of the work produced by the slaves was so demanding it required constant new imports to maintain populations. A hypothetical (or so I hope) example would be a state using dietary and industrial regulations to ensure that the population as a whole was more docile than average due to hormonal and developmental changes while suffering greater infertility. The slow bleeding of citizens seem easy to replace with hard working first generation immigrants who might not be motivated to cause a fuss over any faults in the system because the system is overall much better than the one they came from.
I’m pretty sure public choice theory does not adopt the intentional stance with regards to institutions, and so does not assume that they have interests.
“Regulatory capture” does not mean “the concept of big businesses owning regulators”. It is, rather, a specific proposed explanation for why this takes place, and why it is likely to take place: namely, people working for and invested in a regulated industry have a greater interest in the outcome of regulation than other citizens do, and therefore are likely to expend more effort to influence the regulators.
Notably, regulatory capture does not explain “big business owning regulators” in terms of the members of either big business or regulatory agencies being unusually selfish, evil, or corrupt individuals. It predicts that you can’t fix regulation by installing more honest or virtuous regulators, because the problem is structural rather than personal.
Here’s an example:
I, as a human citizen who likes breathing air without radioactive soot in it, have an interest in shutting down coal-fired power plants. However, the magnitude of my interest in shutting them down is much less than the magnitude of a coal plant employee (especially a well-paid one who is also a shareholder!) in keeping that plant running. Coal soot slightly increases my chance of lung cancer … but shutting down coal plants puts those people out of a job, which is much worse for them than the delta in lung cancer probability is for me. Therefore, any given “coal person” can be expected to spend much more effort on influencing regulators than I will. And if influence is proportional to effort, this means the EPA will tend to favor the views of the coal people and not my views.
However, that said, regulatory capture is part of a broader theory in political economy called public choice theory. And public choice theory has been criticized as not being very predictive; of not having very much in the way of empirical success. Beware the mind-killers, especially when they agree with you!
http://en.wikipedia.org/wiki/Regulatory_capture
http://en.wikipedia.org/wiki/Public_choice_theory#Criticism
That’s not how I was using the term. I was using it as a label for a fact—that over time, the industry being regulated by an agency tends to eventually take over that agency. Public choice economics, whatever it’s limitations, is trying to explain this fact. Note that my usage is consistent with wikipedia (link in parent and grandparent):
(emphasis mine)
It usually goes without saying, but we assume for such examples that the aggregate harm done over all parties is higher than the aggregate good.
The problem here is that the expected utility of acting against coal plants is too small to be worth doing at all. That is, once we solve microtransactions (in practice, rather than in theory), this problem may be much more tractable.
The problem here is that the only institution that does have an interest in the long-term health of the entire population and does have the ability to overrule the interests of the coal plant owners—the state—is crippled under a liberal democracy because its members only have an interest in being re-elected.
Actually I think the state’s interest in the long-term health of the population isn’t really an enduring feature, its more of a plausibly useful strategy.
A state can reasonably defined as a local monopolist of violence, generally speaking its long term interest is basically to maintain that monopoly. There are imaginable scenarios where this involves hurting the long-term health of its entire population if say the result makes the population more docile or if they improve rent extraction that the state needs to maintain its monopoly ect.
Its even possible to imagine stable states that hurt the long-term health of their citizens so much that they die too fast for fertility to compensate, or rather infertility rates rise until they are sub replacement. Since its easy to import new workers (who may or may not be citizens). The obvious example of this seems to be places where the state relied on the slave owning class and the nature of the work produced by the slaves was so demanding it required constant new imports to maintain populations. A hypothetical (or so I hope) example would be a state using dietary and industrial regulations to ensure that the population as a whole was more docile than average due to hormonal and developmental changes while suffering greater infertility. The slow bleeding of citizens seem easy to replace with hard working first generation immigrants who might not be motivated to cause a fuss over any faults in the system because the system is overall much better than the one they came from.
I’m pretty sure public choice theory does not adopt the intentional stance with regards to institutions, and so does not assume that they have interests.