Institutional

Regulatory Capture

What it is

When regulatory agencies created to act in the public interest instead advance the interests of the industries they are supposed to regulate.

How it works

Industries subject to regulation invest heavily in influencing their regulators through lobbying, providing "expert" personnel, funding research, and offering post-government employment. Over time, regulators develop sympathetic relationships with the regulated, adopt industry perspectives, and write rules that protect incumbents rather than the public.

Real-world examples

  • •The SEC staffing senior positions with former Wall Street executives who return to industry after their tenure.
  • •FAA delegating aircraft safety certification to Boeing employees who ultimately certified the 737 MAX.
  • •EPA relaxing pollution standards after extended lobbying campaigns by affected industries.

Ethical guidelines

  • ●Regulatory independence is essential for public safety and market fairness.
  • ●Revolving-door employment between regulators and regulated industries creates inherent conflicts of interest.
  • ●Public interest should be the explicit, measurable mandate of regulatory activity.

How to defend against it

  • ►Research the career backgrounds of key regulatory officials — where did they work before and where do they go after?
  • ►Support mandatory cooling-off periods between industry employment and regulatory positions.
  • ►Follow regulatory proceedings and submit public comments when rules are being written.

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