Studies of regulatory capture tend to assume a binary relationship between industry (the capturer) and regulator (the captive). Closer consideration reveals that the situation is often much more complex and that charges of “capture” are largely an allegation of varying shades of influence, ranging from the highly appropriate (where expert industry influence is indispensable to proper regulation for the public purpose) to the highly inappropriate (bribery, as an extreme example). Capture analysis also tends to assume a single regulator, whereas in many regulatory areas there are multiple regulatory agencies, often with widely diverging missions. Multiple agency contestation can be a major phenomenon in the overall regulatory process, as it is in financial regulation, and this can lead to the conclusion that “capture” by the “industry” concerned is by no means a necessary outcome. Baxter reviews the arena of financial regulation to illustrate these nuances surrounding the notion of regulatory capture. He concludes that (a) much greater specificity of analysis is necessary before one can conclude that industry influence has reached improper dimensions and (b) one should not discount the importance of countervailing forces, such as the rise of expert public interest groups, that can have a positive and balancing effect on the overall regulatory process, ultimately leading to the kind of public-oriented results originally intended.
Nov 052012
November 5, 2012