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Regulatory capture is a form of government failure that occurs when a regulatory agency acts to secure the commercial or political interests of the industry it is charged with regulating. This can cause inefficiencies and risks that reduce quality of life for a nation.
In many cases, regulatory capture results from bribery, revolving doors, political donations and corruption that allow regulators to realize material profits from the industry they are supposed to be regulating. In other cases, regulatory capture involves no exchange of money. For example, an industry may offer to make the regulator's job easier by designing strategies and performing analysis for them. Regulatory capture can also be social in nature whereby an industry sends charming people to befriend the employees of a regulatory agency. Generally, it is healthy for a regulatory agency to have a somewhat adversarial relationship with the target of regulations. Close and comfortable relationships can be a sign of regulatory capture. Other signs are a lack of enforcement actions, a weakening of rules or a move to industry self regulation. Any financial links between the employees of a regulatory agency and regulated industries can also be a sign of capture. This includes offers of employment.
Regulatory capture can damage public interests in areas such as health, safety, the environment, economy, education, transportation, infrastructure and quality of life.|
Type | | Definition | A regulator who is unduly influenced by the industry or organizations that it is supposed to be regulating. | Common Types | BriberyRevolving doorsPolitical donationsCognitive influenceSocial influenceOffers of help that make a regulator's job easier | Example Solutions | Regulations & LawsWhistleblowersAudits & InvestigationsRegulatory reorganizations Performance managementGovernance bodiesComplaints processesThird party monitoring by journalists and non-profit organizations | Related Concepts | |
Business Ethics
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