“Regulatory capture” is the process by which regulatory agencies come to be dominated by the industries they’re supposed to be regulating. Examples of regulatory capture include the Federal Reserve, the SEC, and the FCC. One of today’s big news stories revolves around regulatory capture by the automobile industry of the National Highway Traffic Safety Administration, the recalls due to exploding airbags:
The Department of Transportation will conduct a review of the National Highway Traffic Safety Administration, which has been criticized for its handling of the Takata airbag recall this past week, as well as other recalls this year, a senior administration official told ABC News.
The airbags, made by Japanese auto supplier Takata, are blamed for at least three deaths and more than 100 injuries.
“The roll out of the safety advisory by NHTSA was not optimal, but what is most important right now is that a NHTSA-led investigation uncovered a very serious defect,” a DOT spokesperson said. “Impacted vehicle owners should have their cars immediately checked by their manufacturers. This investigation is far from over and we will leave no stone unturned in the interest of public safety.”
Regulators had allowed a recall limited to areas of the country with “high humidity,” but some lawmakers are now calling for an immediate nationwide recall of millions of potentially faulty airbags.
“There needs to be a real overhaul of the National Highway Transit Safety agency,” said Sen. Richard Blumenthal, D-Conn., one of the lawmakers who has criticized the limited recall.
“These exploding airbags can be killers,” he said. “They literally have killed people.”
So far there have been at least four deaths and how knows how much injury and destruction as a consequence of the airbags and NHTSA’s phlegmatic response is clearly attributable to the cozy relationship between the agency and the automobile industry. as Sen. Blumenthal, quoted above, asserted.
Regulatory capture was a factor in the Gulf Oil spill. It is so prevalent it would make a good topic for a specialized blog rather than just a post or two. It is not benign. It has resulted in the deaths of Americans and the destruction of property and the wrecking of lives. As Sen. Blumenthal noted it is not a problem that can be solved by increasing the sizes of the budgets of the agencies involved or by expanding their power. It requires a change in culture.
It would be fallacious to say that regulatory capture is like a law of physics. But the last line in the essay is the money observation that brings it close. Empirically, capture follows large organizations ( govt) because of culture. Human nature. Control freaks, zealots, soon to be disillusioned do- gooders and malcontents apply for a position at a regulatory agency. Oh, and those apprenticing in the ways of government on their way back to private industry with valuable skills.
The obligatory “regulation is necessary” of course pertains, but it’s a weak reed to lean on. To believe in its robustness and goodness is a fairy tale. Now if you will excuse me, the unicorn hunt is beginning.
So, we’re all agreed here? 363 days of the year, we’ll all run around and scream that Washington is imposing too much regulation on innocent well meaning businessmen and it’s ruining the economy. And the other 2 days, we’ll scream and holler about people being killed by ineffective or even corrupt regulators who failed to watch. with gimlet eyes, all the many dishonest businessmen.
Makes perfect sense to me.