Regulatory Capture
George Stigler · 1971
"Regulation is typically acquired by the industry it regulates and bent to that industry's benefit, not the public's, because the regulated have concentrated interest and lobbying power that diffuse consumers can't match."
Stigler's 1971 paper demolished the comfortable assumption that regulators protect the public. His claim: regulation is usually captured by the very industry it's meant to police.
Stigler modeled regulation as a good industries demand and regulators supply, under pressure from two sides — producers, few and highly motivated, and consumers, many and diffuse. Concentrated interests organize and lobby far more effectively than diffuse ones, so regulation drifts toward protecting incumbents — licensing, tariffs, and entry barriers that look like consumer protection but function as competitive moats for insiders.
Why does Stigler's capture theory predict regulation will tend to favor the regulated industry over consumers?
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The explanation above is written with AI assistance. These are the originals — go to them to check it.
- Let's Not Forget George Stigler's Lessons about Regulatory CaptureGW Regulatory Studies Center
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