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Source link: http://archive.mises.org/5687/who-captures-whom-the-case-of-regulation/

Who Captures Whom? The Case of Regulation

September 28, 2006 by

The Chicago School of economics favored and still favors the theory of “regulatory capture.”. Under this theory, an industry or some portions of an industry cultivate government to obtain laws and rules that favor the industry. The government trades favors for what it wants. But there is more to the story. The government not only baits the trap; it also attempts to crush market substitutes that spring up in response to quality declines. FULL ARTICLE

{ 6 comments }

Vince Daliessio September 28, 2006 at 8:02 am

At least a few important supporters of the regulatory trap called “Net Neutrality” have some awareness of regulatory capture (i.e.,Ed Felten, Cory Doctorow). Hopefully they grow to understand the evil nature of regulatory capture and how its long-run harms eclipse any short-run benefits.

Paul Marks September 28, 2006 at 1:26 pm

A very good, and important, article.

“Industry benefits, public looses” is indeed only a first stage (and sometimes not even that) view of regulation – although this view is miles ahead of the absurd view spread by the mainstream media and academia that the public actually benefits from regulation.

In the end, everyone (apart from the government) looses by regulation – including even the business vested interests.

Ron Brown September 28, 2006 at 5:55 pm

A fairly recent example of going out of the country for lower health care costs are the world class hospitals in places like Thailand, Singapore, and India as shown on 60 Minutes and Business Week a couple of years ago. Their fees average about 1/8 the cost of US hospitals.

GreginOz September 28, 2006 at 7:40 pm

In microcosm, our family business is currently under attack by the local government, which has decided to ‘regulate’ how many car spaces we should have at the front of our auto parts business. Now the local council DOES NOT pay our $4,000/week rent nor does it pay our five permanent and three casual employees wages, indeed it also does not pay our corporate, pay as you go or goods and services taxes. Ahem, we do! I would note that the employees of this local council get paid via OUR TAXES and couldn’t run a business if their LIVES epended on it. What a joke.

Cruiser September 29, 2006 at 9:01 am

Last night I saw a report that small towns are beginning to turn over the performance of town services to private companies.

I apologize for not being able to recall the name of the town that was given as an example, but, in addition to the fact that only four (4) town employees were needed, they were able to reduce by 40% the cost of services provided to the town residents.

HMMMM, now I wonder how long it will take before the costs of government regulation of that service industry reduces the 40% savings into chump change . . .

Alvin Lowi September 29, 2006 at 1:12 pm

Prof Rozeff’s exposition makes a valuable contribution to the conquest theory of political government. The general theory comes to us from Plato through Machiavelli to Lowi (“Incomplete Conquest: Governing America,” Holt, Rinehart, Winston, New York, 1981).

Lowi observes government is the institutionalization of conquest that begins with winning a modicum of consent of the people to be governed by an external authority, creating a virtual parent so to speak. He shows participation to be the key to such consent, and voting in the manner of nose counting to be the cheapest and easiest form of participation. Even if only a minority turn out to vote on cue, that is apparently sufficient to commit the vast majority to being governed by the state. This result is apparently ordained by a sense of fair play ingrained in human consciousness. Most are willing to go along to get along.

Lowi admits that people must be substantially self-governing before they can be successfully governed by political means. From this viewpoint, political government is superfluous. Whereas self-governing people are out to get what they want and die trying, politically governed people are persuaded to want what they get and resign themselves to their fate.

Lowi points out that governments regularly fail, but they never fail to coerce. Once voters legitimize the government’s use of violence, fear of government becomes the tool of compliance. Elections are perfunctory thereafter.

I disagree with my brother on many things but not about Leviathan, or that politics is a social disease. He believes politics is a necessary evil that must be tolerated considering the alternatives. I believe politics, which is habitual, must be quarantined by shunning it in favor of myriad voluntary alternatives. Hopefully thereby, politics will go into indefinite remission. I can afford my belief because I can see man has an abundance of non-political alternatives in governance that come forth from the market in the absence of political suppression.

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