regulatory capture Flashcards
it is a form of
gov failure
define reglatory capture
when regulatory body /gov agency operates in favour of producers rather than consumers
when does regulatory capture often happen
when suppliers or firms have significant lobbying power / influence over gov agencies
why does regulatory capture matter ]
3 reasons
consumers interst may be harmed if producers arent held to account and and enforce minimum standards of service
prices will be higher lading to lower real incomes and regresive effects on lower Y households
damaging externalities if regulator fails to act leading to a social welfare loss
why does regulatory cxapture occur 3 reasons
assymetric info
under resourced
information gas
exlpain cuases of RC - asymetric info
regulators may rely on critical info from firms about costs invesments and requirements
reliant on industry expertiese - so may favour suppleir - who may skew it
exlpain cause of RC underresourced
could be payong people less thna they should
as dont got enough funding
not enough human or capital labour resource to proerly hold industres to account
explain info gaps
ptclrly in industries where g/s complex
epople working for regulator may not understand e.g financial services
the causes or nature of risk
give me an exmape of regularrory capture
financial sevices authority was heavily criticised for not monitoring lending activities of commercial banks in the run up to the gloabl finanical crisi 2007-2009
