Regulatory capture, a leading topic in earlier literature on the politics of public policy, has faded from view in recent decades. This distinguished collection of essays seeks to return such capture to a central position on the research agenda. Some aspects of the formulation of the issues and suggested approaches will be debated, but the quality and compelling interest of the book should help to realize that aspiration.
In their “Introduction,” David A. Moss and Daniel Carpenter explain that the project was inspired by two recent events that gave concerns about regulatory capture a prominent place in political discourse: the 2008 financial crisis and the 2010 Deepwater Horizon oil spill. In both cases, critics pointed to deregulation or lax regulation, sought by regulated industries, as responsible for calamitous harm to the general public. As the primary reference point, Preventing Regulatory Capture holds a sort of conversation—generally not very respectful—with George Stigler and the Chicago school’s “economic theory of regulation.” Under the auspices of the Tobin Project at Harvard, Moss and Carpenter convened a group of 17 leading regulatory scholars—from political science, economics, history, and law—to address the problem of regulatory capture: what it is, when and why it occurs, and how it can best be prevented. To a great extent, the volume has a consistent point of view, mainly in taking capture seriously while setting aside the simplistic assumptions and careless inferences of the Chicago school.
Section I, “Failures of Capture Scholarship,” includes a chapter on the history of scholarship and government policy regarding capture (by William J. Novak), a commentary on the evolving phenomenon of regulatory capture (Richard Posner), and a methodological essay on defining and measuring capture, by Carpenter.
Dismissing the “public-interest theory” as concocted by Stigler, Novak traces serious concern about narrowly based interests distorting government policy back to Plato and Aristotle, through the history of Western political thought, and in American political thought from James Madison to the founders of the American regulatory state. American designers of regulatory institutions have been struggling with the potential for capture, trying to prevent it and having partial success, at every stage. In a brief essay, Posner suggests that the capture theory was far more pertinent for early, single-industry, rates-and-entry regulatory regimes—directed toward airlines, railroads, trucks, and banking, for example—than for the multiindustry or general regulatory programs of recent years—concerning environmental quality, workplace health and safety, and employment discrimination, among other subjects.
Carpenter criticizes the evidence that capture theorists often have offered to support their claims, beginning with Stigler’s uninformative findings on the relation between truck-weight limits and the number of trucks in a state. In a discipline generally noted for methodological rigor, economists have settled for sketchy and indirect evidence to support claims of regulatory capture. Carpenter also criticizes the capture literature for the facile assumption that policies that benefit regulated industries necessarily harm consumers or the general public and represent capture. Indeed, he proposes that research on capture should ground judgments about policy outcomes in explicit assessments of how regulatory policies affect “the public interest,” and outlines several approaches to such analyses.
Section II, “New Conceptions of Capture—Mechanisms and Outcomes,” includes chapters that present “cultural” (as opposed to material-incentive) mechanisms of capture, focusing on financial regulation (James Kwak); a game-theory model of information complexity and asymmetry as causes of capture (Nolan McCarty); an assessment of the potential for the capturing of academic economists who advise regulators, through various industry-controlled inducements (Luigi Zingales); and a historical account of the mixed evidence for certain kinds of capture of the Food and Drug Administration (Carpenter). Kwak’s chapter on cultural capture integrates a large body of work in behavioral economics and other fields that explores cognitive, social-psychological, and other nonmaterial factors that promote capture of regulatory officials. Although the effort to encompass the various influences under the umbrella term cultural capture is somewhat strained, the chapter demonstrates that scholars have advanced beyond stereotyped hypotheses about campaign contributions and post-agency employment as mechanisms of industry influence.
Section III, “Regulatory Case Studies,” includes studies of a major Federal Radio Commission decision in 1927 (Moss and Jonathan B. L. Decker); coal mine safety regulation (Sanford C. Gordon and Catherine Hafer); regulatory issues in the Gulf oil spill (Christopher Carrigan); state and local influence in rulemaking by the Department of Transportation (Susan Webb Yackee); and public health regulation by three distinct federal agencies (Mariano-Florentino Cuéllar). The case chapters are examples of the kinds of careful and penetrating empirical work called for by Carpenter and Moss. Taken together, they demonstrate that some of the most notorious alleged instances of regulatory capture actually involved decisions that had broadly based interest-group and public support. Regulated industries do sometimes block or inhibit regulatory action that would benefit consumers, but the result is often apparently suboptimal regulation—still better for consumers than no regulation at all.
Section IV, “The Possibility of Preventing Capture,” has chapters demonstrating empirically the potential for such prevention through consumer empowerment programs (Daniel Schwarcz); judicial review (M. Elizabeth Magill); and executive review (Michael A. Livermore and Richard L. Revesz). These chapters suggest that although we cannot eliminate potential excesses of regulated-industry influence, appropriate devices can—and already do—moderate those risks. Carpenter and Moss draw together the volume’s findings in a concise Conclusion.
Preventing Regulatory Capture should set the agenda for a new generation of political scientists and other scholars who will investigate critical issues about the influences on regulatory decisions and the ability of regulatory programs to serve their intended purposes. In particular, it will help free regulatory studies from a simplistic opposition between categorical capture and public-interest accounts of regulation. The resulting research will take into account that regulatory agencies—like other policymakers—respond to a variety of competing demands. In some cases, the main threat to constructive performance will come from ideological groups or the mass public.
Some aspects of the volume’s proposed agenda are debatable. In my view, scholars of decision processes or political influence do not need to make judgments about the actual effects of policies—for example, whether they actually serve the public interest or, rather, benefit only the regulated industries. What matters for understanding policymaking is to assess the relative influence of the various actors, groups, or political forces whose influence will generally determine those effects. We need to understand, for example, the influence of independent experts and policy analysts in each area of policy. Whether such experts are ultimately correct in their recommendations—on any given matter, or in any given period—is not material for understanding an agency’s behavior or predicting its performance on other issues.
I also think that a focus on regulatory capture—that is, excessive or distorting influence specifically of regulated industries on regulatory agencies—as the general phenomenon of interest is arbitrarily narrow. In my view, scholars should focus on the influence of various types of constituencies and influence agents on various types of government programs. The theoretical work should encompass, for example, the influence of commodity groups on agricultural subsidies, of service providers on social service programs, of teachers’ unions on education policy, and of industry segments and client groups on regulatory policies. Work on regulatory capture will not thrive as an independent cottage industry. In many ways, the concepts, methods, and findings of this notable volume can provide guidance for that broader enterprise.
