Regulatory capture is a phenomenon where regulators become overly influenced by the industries they are tasked with regulating. The result is that an agency, charged with acting in the public interest, instead acts in ways that benefit the industry it is supposed to be scrutinizing. Regulatory capture is a process by which regulatory agencies may come to be dominated by the interests they regulate and not by the public interest. The result is that the agency instead acts in ways that benefit the interests it is supposed to be regulating. Industries devote large budgets to influencing regulators, while individual citizens spend only limited resources to advocate for their own rights. Regulatory agencies that come to be controlled by the industries they are charged with regulating are known as captured agencies, and agency capture occurs when that governmental body operates essentially as an advocate for the industries it regulates. Such cases may not be directly corrupt, as there is no quid pro quo; rather, the regulators simply begin thinking like the industries they regulate, due to heavy lobbying. In the run-up to the 2008 financial crisis, financial regulators like the Securities and Exchange Commission became too cozy with large banks, which allowed mortgage lending to slip. Instead of regulating the banks, the banks were writing the regulations. This contributed to the housing bubble and the Great Recession.
Translate regulatory capture into English language that a classmate of yours would understand.
Give an example of regulatory capture.
If you were a lobbyist for an industry interest groups how would you feel about regulatory capture?
If you were a worker for a governmental regulatory agency how would you feel about regulatory capture?
How does regulatory capture impact regular citizens?
How does money enable regulatory capture?
What could a government do to stop regulatory capture?
Do you feel like America’s government is suffering from regulatory capture?
Remember!
Now, let’s commit this term to our long-term memory. On a scrap piece of paper, take 10 or 20 seconds to draw merit system then draw regulatory capture. Draw with symbols or stick figures if you wish. Nothing fancy. Don’t expect a masterpiece. No one else will see this but you. Look at your drawing. That’s all - now it’s downloaded into your memory. Destroy the piece of paper in a most delightful way.