Regulatory Capture

Regulatory capture describes an agency that, over time, advances the interests of the industry it regulates. Critics of the Interstate Commerce Commission argued as early as the 1950s that it had come to protect railroads from competition. Economist George Stigler gave the idea its best-known form in his 1971 article The Theory of Economic Regulation, arguing that regulation is often sought by industries and designed and operated primarily for their benefit. The work contributed to his 1982 Nobel Prize and shaped public choice theory.

Capture can happen in several ways: regulated firms have more at stake and more information than the public, agencies depend on industry expertise and cooperation, and officials may move between agencies and the companies they oversee, a pattern called the revolving door. Scholars also describe cultural capture, in which regulators come to share an industry's outlook. Examples often cited include the Minerals Management Service before the 2010 Deepwater Horizon spill, which was then broken up, and the Federal Aviation Administration's delegation of safety certification to Boeing before the 737 MAX crashes in 2018 and 2019.

Safeguards include ethics rules, cooling-off periods before former officials may lobby their agencies, public comment requirements, inspectors general, judicial review, and agency structures meant to insulate decision makers. Economists and legal scholars disagree about how common capture is and what to do about it. Those who favor less regulation say capture shows that agencies cannot be trusted and that markets work better, while those who favor stronger regulation say the answer is better-funded, more independent agencies. Some researchers warn that the label is applied too loosely to any decision a critic dislikes.