“Preventing Regulatory Capture: Special Interest Influence and How to Limit it”

David A. Moss
John G. McLean Professor of Business Administration
Harvard Business School

January 14, 2013
Please note time change: 4:00 PM – 6:00 PM
Room 200, Larkin Building
15 Devonshire Place

Abstract:  When markets or regulations fall short of our expectations, observers often point to regulatory capture as a culprit. Unfortunately, regulatory capture is very commonly misdiagnosed and mistreated. Misdiagnosed because the study of regulatory capture, in both academic and policy circles, has grown stale and ever more detached from practice. All too often, observers are quick to see capture as the explanation for almost any regulatory problem, making large-scale inferences about agencies and their cultures without a careful look at the evidence. At the same time, there appears to be a great deal of fatalism – some of it strategic, no doubt – about the impossibility of ameliorating or preventing capture, virtually ensuring that the ailment is mistreated in many cases. Some or even much of this may be the product of highly simplified models – models in which the complete capture of regulators by incumbent firms is all but inevitable. We aspire to improve our understanding of capture, making it more rigorous, more thorough, and more practically useful to those who want to prevent capture. Capture is real and a genuine threat to regulation, we recognize, but regulation is also a fact of modern life, and undoubtedly necessary in some circumstances to protect the public and stave off catastrophe. The critical question is whether capture, where it exists, can be mitigated or prevented. We believe the evidence strongly suggests that the answer is yes, and that better study of regulation and special interest influence can show us how to limit capture and make regulatory governance a more useful tool for accomplishing public ends.