Capture is a phenomenon where private interests gain control of major segments of government—especially those of lawmaking and law enforcement—and employ them to serve their own particularistic ends. It is typically discussed with regard to regulation and hence often referred to as regulatory capture. However, as we shall see, often much more than regulation is captured.

Liberals tend to favor regulations as expressions of the public will and serving the common good, as a way to protect minors, patients, and many kinds of consumers from abuse by unscrupulous actors in the private sector. Laissez-faire conservatives and libertarians tend to oppose regulations because they view them as an abuse of the government’s power and as harmful to the economic well-being of the nation. Yet this form of the debate overlooks the phenomenon of regulatory capture which reveals that regulations work neither to promote the public good nor to undermine private actors. These observations have led some scholars to argue that regulations are useless or worse, and others to seek more effective forms of regulation.

The realities of regulation

The term regulatory capture is often associated with the work of the economist George Stigler and his frequently cited article “The Economic Theory of Regulation,” in which he writes that, “as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.”This work builds upon Stigler’s previous essay with Claire Friedland, “What can Regulators Regulate? The Case of Electricity,”which takes up the question of the efficacy of regulation more generally and concludes that regulatory efforts rarely cause any deviation from market outcomes. Stigler’s research on regulation influenced the work of a number of later scholars investigating the phenomenon of capture and applying the methods of public choice theory to regulatory issues.

In addition, the liberal-conservative debate represents a case of deficient generalization, in which various observers note incidents where the realities of regulation deviate from their core assumptions, but neither side has proved ready to draw conclusions from these numerous incidents, most of which point in the same direction. Thus, many liberals are quite aware of regulations that end up serving private interests rather than the public, but they still strongly favor regulations.