Thursday, March 3, 2011
Sometimes They Ask for Regulation
It is not always the case that business is against government regulation, even those businesses that will be negatively affected by the regulation. For example, a few years ago three oil companies asked policy makers across the world to pass climate change regulations. Why would they do something like that? Taking climate change and climate change mitigation legislation as inevitable, they want to have time to adjust their businesses to new rules. Or, for the more cynical, perhaps they think that taking a proactive stance will secure them a seat at the table. Either way, in seeking regulation, they are attempting to minimize risk.
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One important work on this topic is a 1971 article titled "The Theory of Economic Regulation" by George Stigler:
ReplyDeleteA central thesis of this paper is that, as a rule, regulation is acquired by the industry and designed and operated primarily for its benefit.
Another term for this phenomenon is regulatory capture.
http://www.jstor.org.libproxy.mit.edu/stable/3003160