Reforming Regulation

Policies to Counteract Capture and Improve the Regulatory Process.

The debate over federal regulation has long been at the center of political contests. But surprisingly, the degree of agreement about regulation is considerable. No serious commentator denies that regulation is essential to ensuring well-functioning markets; protecting the health and safety of workers and families; and preventing fraud, corruption, and theft. Smart regulation is what makes cars safe to drive, lakes and rivers safe to swim in, and food safe to eat. At the same time, every serious commentator recognizes that poorly designed regulations can be detrimental; they can stack the deck in favor of special interests, prevent competition, and inhibit innovation.

Despite this sensible structure, however, the U.S. regulatory system has room for improvement. In particular, there are two areas that deserve greater attention. First, despite its many procedural protections, the regulatory process is in practice skewed in favor of industry interests. Second, regulators are often delayed in meeting their statutory obligations. Improving the regulatory process will require strategies to reduce delays and inaction and to counteract what is termed regulatory capture—when regulation is skewed toward regulated industry to the detriment of the public interest.

One of the central challenges for regulation today is that the regulatory process is too often tilted in favor of special interests. This does not mean that regulations in the public interest are never possible but only that when looked at in the aggregate, the system leans in a direction that tends to help powerful special interests rather than the public interest.

Regulatory capture exists when regulation is consistently directed toward the interests of regulated industry and away from the public interest.3 Capture is not necessarily as crass and direct as bribery. Nor does it necessarily operate through political campaign finance channels, such as industry influence over congressional committees that oversee agencies.

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