regulatory capture

Syllable breakdown

Dictionary meaning

a political economy concept describing the process by which a regulatory agency, created to act in the public interest, instead comes to advance the commercial or political interests of the industries or actors it is supposed to regulate, having been effectively controlled or co-opted by those interests; regulatory capture can occur through multiple mechanisms — the revolving door between industry and regulatory agency that creates personal loyalties and career incentives; industry's superior information and analytical capacity relative to the regulator; the concentrated economic interests of regulated industries compared to the diffuse interests of the general public; and the political influence that well-resourced industries exert on the appointment of agency leadership; the concept was developed by economists George Stigler and Sam Peltzman and has been applied to financial regulation, pharmaceutical regulation, environmental regulation, and telecommunications

Examples

• Critics argued that regulatory capture explained why the financial regulator had ignored repeated warnings about the bank's risk exposure.
• The revolving door between the drug industry and its regulator raised concerns about long-term regulatory capture.