Hostname: page-component-78c5997874-ndw9j Total loading time: 0 Render date: 2024-11-15T17:12:33.272Z Has data issue: false hasContentIssue false
  • English
  • Français

Regulatory capture and quality

Published online by Cambridge University Press:  01 August 2016

Laurence Tai
Laurence Tai*
Affiliation:
Independent Scholar, Washington, DC, USA E-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Drawing on accounts of regulatory capture in which an industry’s influence activities pull regulation in its direction, apart from incentives or information, this article develops a formal model of capture as a shift in a policy-making agent’s preferences, due to costly actions by the industry. One type of action is rentseeking that produces only capture, whereas the other type also improves regulatory quality by producing information that reduces policy uncertainty. The model shows how the ability to capture the agent can incentivise the interest group to produce more information. Thus, aligning an agent’s preferences with a political principal’s and immunising him from capture is not generally optimal; instead, the principal prefers an agent who is susceptible to capture associated with quality improvements but also initially more opposed to the group than the principal. A comparison of two Securities and Exchange Commission rulemakings illustrates the logic of the model.

Keywords

appointmentsindustry influenceinformationlobbyingregulatory capture
Type
Research Article
Information
Journal of Public Policy , Volume 37 , Issue 3 , September 2017 , pp. 261 - 286
Copyright
© Cambridge University Press, 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aberbach, J. D. and Rockman, B. A. (2009) The Appointments Process and the Administrative Presidency. Presidential Studies Quarterly 39(1): 38–59.Google Scholar
Aghion, P. and Tirole, J. (1997) Formal and Real Authority in Organizations. Journal of Political Economy 105(1): 1–29.Google Scholar
Alden, W. (2014) After Split Vote, S.E.C. Approves Rules on Money Market Funds. New York Times, 24 July, B3.Google Scholar
Ayres, I. and Braithwaite, J. (1992) Responsive Regulation: Transcending the Deregulation Debate. New York: Oxford University Press.CrossRefGoogle Scholar
Barkow, R. E. (2010) Insulating Agencies: Avoiding Capture Through Institutional Design. Texas Law Review 89(1): 15–79.Google Scholar
Baron, D. P. and Myerson, R. B. (1982) Regulating a Monopolist With Unknown Costs. Econometrica 50(4): 911–930.Google Scholar
Bernstein, M. H. (1955) Regulating Business by Independent Commission. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Bertelli, A. and Feldmann, S. E. (2007) Strategic Appointments. Journal of Public Administration Research and Theory 17(1): 19–38.CrossRefGoogle Scholar
Boehmke, F. J., Gailmard, S. and Patty, J. W. (2013) Business as Usual: Interest Group Access and Representation Across Policy-Making Venues. Journal of Public Policy 33(1): 3–33.Google Scholar
Bubb, R. and Warren, P. L. (2014) Optimal Agency Bias and Regulatory Review. Journal of Legal Studies 43(1): 95–135.Google Scholar
Bueno de Mesquita, E. and Stephenson, M. C. (2007) Regulatory Quality Under Imperfect Oversight. American Political Science Review 101(3): 605–620.Google Scholar
Carpenter, D. and Moss, D. A. (2014) Introduction. In Carpenter D. and Moss D. (eds.), Preventing Regulatory Capture: Special Interest Influence, and How to Limit It. New York: Cambridge University Press, 1–22.Google Scholar
Clinton, J. D., Bertelli, A., Grose, C. R., Lewis, D. E. and Nixon, D. C. (2012) Separated Powers in the United States: The Ideology of Agencies, Presidents, and Congress. American Journal of Political Science 56(2): 341–354.Google Scholar
Clinton, J. D. and Lewis, D. E. (2008) Expert Opinion, Agency Characteristics, and Agency Preferences. Political Analysis 16(1): 3–20.CrossRefGoogle Scholar
Coglianese, C. (2001) Assessing the Advocacy of Negotiated Rulemaking: A Response to Philip Harter. NYU Environmental Law Journal 9(2): 386–447.Google Scholar
Coglianese, C. (2003) Is Satisfaction Success? Evaluating Public Participation in Regulatory Policymaking. In O’Leary R. and Bingham L. B. (eds.), The Promise and Performance of Environmental Conflict Resolution. Washington, DC: Resources for the Future, 69–86.Google Scholar
Coglianese, C., Zeckhauser, R. and Parson, E. (2004) Seeking Truth for Power: Informational Strategy and Regulatory Policymaking. Minnesota Law Review 89(2): 277–341.Google Scholar
Crawford, V. P. and Sobel, J. (1982) Strategic Information Transmission. Econometrica 50(6): 1431–1451.Google Scholar
Dal Bó, E. (2006) Regulatory Capture: A Review. Oxford Review of Economic Policy 22(2): 203–225.Google Scholar
DeGroot, M. H. (1970) Optimal Statistical Decisions. New York: McGraw Hill.Google Scholar
Dessein, W. (2002) Authority and Communication in Organizations. Review of Economic Studies 69(4): 811–838.Google Scholar
Ellig, J., McLaughlin, P. A. and Morrall, J. F. (2013) Continuity, Change, and Priorities: The Quality and Use of Regulatory Analysis Across US Administrations. Regulation & Governance 7(2): 153–173.Google Scholar
Furlong, S. R. and Kerwin, C. M. (2005) Interest Group Participation in Rule Making: A Decade of Change. Journal of Public Administration Research and Theory 15(3): 353–370.Google Scholar
Gailmard, S. and Patty, J. W. (2013) Learning While Governing: Information, Accountability, and Executive Branch Institutions. Chicago, IL: University of Chicago Press.Google Scholar
Gerber, E. R. and Jackson, J. E. (1993) Endogenous Preferences and the Study of Institutions. American Political Science Review 87(3): 639–656.Google Scholar
Golden, M. M. (1998) Interest Groups in the Rule-Making Process: Who Participates? Whose Voices Get Heard? Journal of Public Administration Research and Theory 8(2): 245–270.Google Scholar
Gordon, S. C. and Hafer, C. (2005) Flexing Muscle: Corporate Political Expenditures as Signals to the Bureaucracy. American Political Science Review 99(2): 245–261.Google Scholar
Grossman, G. M. and Helpman, E. (1994) Protection for Sale. American Economic Review 84(4): 833–850.Google Scholar
Harter, P. (1982) Negotiating Regulations: A Cure for Malaise. Georgetown Law Journal 71(1): 1–118.Google Scholar
Huntington, S. P. (1952) The Marasmus of the ICC: The Commission, the Railroads, and the Public Interest. Yale Law Journal 61(4): 467–509.Google Scholar
Kagan, E. (2001) Presidential Administration. Harvard Law Review 114(8): 2245–2385.Google Scholar
Krueger, A. O. (1974) The Political Economy of the Rent-Seeking Society. American Economic Review 64(3): 291–303.Google Scholar
Kwak, J. (2014) Cultural Capture and the Financial Crisis. In Carpenter D. and Moss D. A. (eds.), Preventing Regulatory Capture: Special Interest Influence, and How to Limit It. New York: Cambridge University Press, 71–98.Google Scholar
Labaton, S. (2008) Agency’s ’04 Rule Let Banks Pile Up New Debt, and Risk. New York Times, 3 October, A1.Google Scholar
Laffont, J.-J. and Tirole, J. (1991) The Politics of Government Decision-Making: A Theory of Regulatory Capture. Quarterly Journal of Economics 106(4): 1089–1127.Google Scholar
Landis, J. M. (1960) Report on Regulatory Agencies to the President-Elect. Washington, DC: U.S. Government Printing Office.Google Scholar
Levine, M. E. and Forrence, J. L. (1990) Regulatory Capture, Public Interest, and the Public Agenda: Toward a Synthesis. Journal of Law, Economics, and Organization 6(Special Issue): 167–198.Google Scholar
Lewis, D. E. (2008) The Politics of Presidential Appointments: Political Control and Bureaucratic Performance. Princeton, NJ: Princeton University Press.Google Scholar
Livermore, M. A. and Revesz, R. L. (2014) Can Executive Review Help Prevent Capture?. In Carpenter D. and Moss D. A. (eds.), Preventing Regulatory Capture: Special Interest Influence, and How to Limit It. New York: Cambridge University Press, 420–450.Google Scholar
McCarty, N. (2014) Complexity, Capacity, and Capture. In Carpenter D. and Moss D. A. (eds.), Preventing Regulatory Capture: Special Interest Influence, and How to Limit It. New York: Cambridge University Press, 99–123.Google Scholar
McDonnell, B. and Schwarcz, D. (2010) Regulatory Contrarians. North Carolina Law Review 89(5): 1629–1682.Google Scholar
McGrath, C. (2006) The Ideal Lobbyist: Personal Characteristics of Effective Lobbyists. Journal of Communication Management 10(1): 67–79.Google Scholar
Milgrom, P. R. (1981) Good News and Bad News: Representation Theorems and Applications. Bell Journal of Economics 12(2): 380–391.CrossRefGoogle Scholar
Milyo, J., Primo, D. and Groseclose, T. (2000) Corporate PAC Campaign Contributions in Perspective. Business and Politics 2(1): 75–88.Google Scholar
Nownes, A. J. (2013) Interest Groups in American Politics: Pressure and Power, 2nd ed. New York: Routledge.Google Scholar
Painter, R. W. (2009) Getting the Government America Deserves: How Ethics Reform Can Make a Difference. New York: Oxford University Press.Google Scholar
Quirk, P. J. (1981) Industry Influence in Federal Regulatory Agencies. Princeton, NJ: Princeton University Press.Google Scholar
Shapiro, S. A. (2012) The Complexity of Regulatory Capture: Diagnosis, Causality and Remediation. Roger Williams University Law Review 17(1): 221–257.Google Scholar
Stephenson, M. C. (2011) Information Acquisition and Institutional Design. Harvard Law Review 124(6): 1422–1483.Google Scholar
Stigler, G. J. (1971) The Theory of Economic Regulation. The Bell Journal of Economics and Management Science 2(1): 3–21.CrossRefGoogle Scholar
Stigler, G. J. and Becker, G. S. (1977) De Gustibus Non Est Disputandum. American Economic Review 67(2): 76–90.Google Scholar
Thompson, D. F. (1995) Ethics in Congress: From Individual to Institutional Corruption. Washington, DC: Brookings Institution Press.Google Scholar
Tullock, G. (1967) The Welfare Costs of Tariffs, Monopolies, and Theft. Western Economic Journal 5(3): 224–232.Google Scholar
Wagner, W. E. (2010) Administrative Law, Filter Failure, and Information Capture. Duke Law Journal 59(7): 1321–1432.Google Scholar
West, W. F. (2009) Inside the Black Box: The Development of Proposed Rules and the Limits of Procedural Controls. Administration & Society 41(5): 576–599.Google Scholar
Wilson, J. Q. (1980) The Politics of Regulation. In Wilson J. Q. (ed.), The Politics of Regulation. New York: Basic Books, 357–394.Google Scholar
Wright, J. R. (1996) Interest Groups and Congress: Lobbying, Contributions, and Influence. Boston, MA: Allyn and Bacon.Google Scholar
Yackee, J. W. and Yackee, S. W. (2006) A Bias Towards Business? Assessing Interest Group Influence on the U.S. Bureaucracy. Journal of Politics 68(1): 128–139.Google Scholar
Yackee, S. W. (2012) The Politics of Ex Parte Lobbying: Pre-Proposal Agenda Building and Blocking During Agency Rulemaking. Journal of Public Administration Research and Theory 22(2): 373–393.Google Scholar
Supplementary material: File

Tai Supplementary Material

Proofs of Propositions

Download Tai Supplementary Material(File)
File 42.4 KB