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Spring 2022

ISSN 0890-913X

Volume 37, Number 1

Rethinking Regulatory Capture

Randall G. Holcombe, Florida State University

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RethinkingRegulatoryCaptureRandallG.Holcombe*FloridaStateUniversityTheJournalofPrivateEnterprise37(1),2022,33-45AbstractThecapturetheoryofregulationconcludesthatregulatoryagenciesactintheinterestsofregulatedfirmsratherthaninthegeneralpublicinterest.Thosebenefitstoregulatedfirmsaretransitory.Inthelongrun,regulatoryprotectionsbenefitlegislatorsandregulatorsbymakingthosewhoareregulateddependentonthosewhohavethepowertoextendorterminatethoseregulatoryprotections.Regulatedfirmsmustcontinuetosupporttheinterestsofthepoliticiansonwhosedecisionstheirprofitabilitydepends.Ultimately,firmsarecapturedbythosewhoregulatethem,ratherthantheotherwayaround.JELCodes:D21,L51,P16Keywords:regulation,rentseeking,transitionalgains,capturetheory,legislativeprocessesThecapturetheoryofregulation(Stigler1971)concludesthatregulatoryagenciesarecapturedbythefirmstheyregulateandtheyactintheinterestsofthosefirmsratherthaninthegeneralpublicinterest.1Thistheory,whilesurelydescriptiveinmanycases,isincompletebecauseitdoesnotexplainwhylegislatorswouldapproveregulatoryinstitutionsthatservetofurthertheinterestoftheregulated.Someinsightonthisquestioncomesfromrecognizingthatthebenefitfromsuchregulationistransitoryanderodesasthepresentvalueoffuturebenefitsiscapitalizedintoassetsownedbythosewhoareregulated(Tullock1975).Theresultisthatregulatedfirmsbecomedependentonthecontinuationoftheirregulatoryprotections,whichallowslegislatorstoextractpaymentsfromthemtoallowregulatoryprotectionstocontinue(McChesney1987,1997;Schweizer2012).*Presentedatthe2022annualmeetingoftheAssociationforPrivateEnterpriseEducation.ThepaperbenefitedfromdiscussionataregulationworkshopsponsoredbytheInstituteforHumaneStudiesinJune2021.1ThisconclusionisalsoreachedbyKolko(1963),whoseworkpredatesStigler’s,andRothbard(2017),amongothers.SeePosner(1974)foradiscussionofthistheorycontrastedwiththepublic-interestandinterest-grouptheoriesofregulation.

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Metadata [hide]

Title	Rethinking Regulatory Capture
Authors/Creators:	Randall G. Holcombe, Florida State University
Year:	2022
Volume:	37
Number:	1
Pages:	33 - 45
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	regulation, rent seeking, transitional gains, capture theory, legislative processes

Citation:
Holcombe, Randall G. / 2022. "Rethinking Regulatory Capture." The Journal of Private Enterprise, 37(1): 33-45.