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Chapter 11: Q. 25 (page 272)

What is regulatory capture?

Short Answer

Expert verified
Regulatory Capture is a failure of government that occurs when a regulatory body is created to serve the public interest.
Instead, it supports the political or financial interests of special interest groups that control the industry or sector that it is intended to govern.

Step by step solution

01

Step1. Introduction

Regulatory capture is a type of government failure in which regulators grow friendly to the industry they are intended to regulate.

02

Step2. Explanation

RegulatoryCaptureisafailureofgovernmentthatoccurswhenaregulatorybodyiscreatedtoservethepublicinterest.
Instead,itsupportsthepoliticalorfinancialinterestsofspecialinterestgroupsthatcontroltheindustryorsectorthatitisintendedtogovern.
Whenpoliticalpartiesorcorporationsobtainregulatoryauthority,theirintereststakeprecedenceoverthepublic's.
Asaresult,societyasawholewilllosemoney.
As a result, "captured agencies" refers to government entities that have been enslaved by regulatory capture.

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