Understanding Regulatory Capture: An Academic Perspective from the United States

Authors

Lawrence G. Baxter, Duke Law SchoolFollow

Document Type

Chapter of Book

Publication Date

2012

Keywords

regulatory capture, financial regulation

Abstract

Although it sometimes seems that financial regulatory agencies have been entirely captured by the larger players in the industry they regulate, a closer examination reveals that a variety of factors contribute to policy outcomes in this arena. Agencies have different agendas and stakeholders, and banks often perform quasi-governmental roles that blur the line between the captors and the captured. The real danger is that public policy can be distorted as a result of excessive influence by one set of interests at the expense of others. This danger is best thwarted or at least mitigated through the application of a range of institutions and processes, ranging from external checks on agency action to a strengthening of institutions designed to represent interests that the regulated industry itself is unlikely to promote. Internal checks that might provide incentives for more public-oriented actions on the part of industry participants are also relevant.

Citation

Lawrence G. Baxter, Understanding Regulatory Capture: An Academic Perspective from the United States, in The Making of Good Financial Regulation: Towards a Policy Response to Regulatory Capture 31-39 (Stefano Pagliari, ed., 2012)