In the long run, regulatory agencies tend to appear to answer more to the businesses and organizations they're supposed to regulate than to the public they were created to protect.

What causes this, according to many political theorists, is that the subjects of regulation have a greater interest in bringing resources to bear on influencing the agency than you or I do.

One way of "capturing" the regulatory agency in this way is to hire the agency's former employees (often wooing them away from the agency by offering higher pay)—who then, armed with both agency and industry experience, return to the agency as senior regulators. Agencies often hire from the industry, because that way they get people with an insider's knowledge. However, they end up also getting people with an insider's bias.

An alternate hypothesis proposed is that what appears to be the regulatory agency acting in the interests of the industry is merely a result of having regulators who understand the industry’s needs, as opposed to outsiders who expect the impossible from the industry and expect the agency to enforce it. Proponents of this view say these hiring practices avoid ivory tower agencies that are isolated from the industry.

For example, if the Department of Transportation hires people from the auto industry, capture theorists would say that these industry representatives are influencing the department to be lenient towards the auto industry. Their critics would say that what appears to be leniency is a realistic assessment of what measures that industry is and is not capable of taking, and that those who expect tighter regulation are simply unacquainted with the industry's needs and abilities—that is, they want safer (or cleaner, or otherwise better) cars than the automakers are capable of producing.

Sources:

  • http://www.amosweb.com/cgi-bin/gls.pl?fcd=dsp&key=capture+theory+of+regulation
  • http://en.wikipedia.org/wiki/Capture

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