Th3.6: Regulatory Capture Flashcards
When does regulatory capture occur?
when the regulator is captured by the firm/industry they are regulating
The fact that the regulator will often meet with the firms’ employees will mean…
they become more empathetic and able to ‘see things from their perspective’, which will remove impartiality and weakens their ability to regulate
What can large corporations invest huge amounts in?
learning how to play the system and in gaining support of their regulator
It is likely that the regulator will have worked in the sector for many years, as these people will have experience and knowledge of the industry. As a result…
they will have greater personal connections with those that are regulating and this makes it difficult for them to be unbiased
What is this an example of?
government failure and argues that government regulation is not the most effective method of achieving competition and efficiency
