The Theory of Economic Regulation

“For instance, regulators and standard setters can be captured by the regulated (e.g., Stigler 1971; Mahoney 2001).”

“28 Electronic copy available at: https://ssrn.com/abstract=3642508 with the political economy literature (Peltzman, 1976; Stigler, 1971), these firms are more exposed to climate change regulation.”

“The “ s-frame ” collapses policy distinctions between carrots, sticks, taxes, bans, subsidies, and handouts – a motley crew that includes plastic-bag bans, health-food subsidies, changes to building codes, and nationwide overhauls to wealth redistribution and universal healthcare.”

“Further, cross-held firms also exhibit higher PCMs than competitors that are not 6U.S. Government Agencies charged with the dual mandates of promoting and regulating air travel and banking are often cited as examples of “regulatory capture,” e.g., Stigler (1971).”

“As suggested by public choice theory (Stigler 1971), incumbents may lobby for regulation to keep out competitors and create rents for themselves.”

“Regulation & Governance published by John Wiley & Sons Australia, Ltd. 5 particular regime (Stigler 1971, 1975).”

“In terms of identification, one of the main issues is the regulatory capture problem (Stigler, 1971),”

“Similarly, regulatory economics points to potential problems with public sector regulators, such as resource constraints, inefficient bureaucracies, regulatory capture, and political pressure (e.g., Demsetz 1968; Stigler 1971; La Porta, Lopez-De-Silanes, and Shleifer 2006).”

“This lack of government enforcement can be attributed, at least in part, to regulatory capture, understood as the process by which an industry ‘‘captures’’ the agencies designed to regulate it (Stigler 1971).”

“Political Demand for Policy Instruments The effective demand for policy instruments comes largely from firms and interest groups (Stigler 1971; Peltzman 1976; Becker 1983).”

“Research also points out that regulators could be captured by the industry (e.g., Stigler 1971; Correia 2014; Heese et al. 2017) or could be inconsistent in their enforcement (Agarwal et al. 2014; Heese et al. 2016; Heese 2019).”

“…(Basu, Bhattacharya, and Mishra 1992), the principal-agent (PA) model is the most commonly employed analytical framework for the analysis of the e ffi ciency of bureaucracies (Klitgaard 1988; Groenendjik 1997; Rauch and Evans 2000) and is rooted in the theory of regulation proposed by Stigler (1971).”

“…purposes of regulation can be made by observing how regulation operates in practice and what effects it has—in other words, one should identify the ‘winners’ of a particular policy, and then assume that this was the intended effect of the regulation and therefore evidence of capture (Stigler 1971).”

“Political institutions provide differential access to decision-making (Besley and Case 2003), while political groups and individuals have higher or lower capacity to participate in governance systems and influence the outcomes (Olson 2009; Sabatier and Jenkins-Smith 1993; Stigler 1971).”

“Stigler (1971) and the social choice school emphasize the capture of regulators and politicians.”

“…action that complements accounts of such support that have emphasized the role of power on the part of the industry receiving the support (Stigler, 1971; Dal Bó, 2006; Baldwin, Cave, and Lodge, 2012), focused on social movements that frame the industry as a solution to a problem…”

“We focus on macro- 2 See, among others, studies like Surroca et al. (2010), Edmans (2011), Servaes and Tamayo (2013), Eccles et al. (2014), Dimson et al. (2015), Flammer (2015), Buchanan et al. (2018), Nguyen et al. (2020), Bardos et al. (2020), and Garel and Petit-Romec (2021).”

“…the dynamics at play in the bargaining process leading up to new antislavery legislation cannot be reduced to simple ‘regulatory capture’ (Stigler, 1971), existing theories on lobbying and advocacy, or the default assumption that corporations will resist and seek to thwart all new…”

“Corroboration of the governance failures and apparent ‘regulatory capture’ (Stigler 1971) are highlighted in relation to water compliance in New South Wales by KenMatthews AO who was the founding Chair and Chief Executive of the NWC and previously the Secretary of two Australian Government departments.”

“Insufficient expertise increases the risk that information asymmetries between the regulated industry and regulators lead to regulatory capture [219], and reduce meaningful enforcement.”

“Even if we could thwart all attempts of rent-seeking forces to capture the regulatory process as described by Stigler (1971), skeptics have long suspected that the “law of unintended consequences” often undermines even otherwise virtuously conceived regulations in a complex and dynamic economy…”

“Here, we employ the concepts of rent-seeking, deliberate actions by particular interests to secure preferential treatment and/or pecuniary benefits from public decision making (Lambsdorff, 2002), and regulatory capture, decision making by public servants that favours particular and regulated interests (Stigler, 1971).”

“Regulatory competition theories highlight the importance of highly competitive global mar-ketplace, which generates pressure for regulatory change either at the national level or in regional blocks (e.g., Esty & Geradin, 2000; Stigler, 1971).”

“Economic regulation theory often seeks to strike a balance between promoting competition and preventing monopolistic behavior, which could lead to inefficiencies or exploitation (Stigler 1971).”

“Indeed, while some authors emphasize the positive effects of the phenomenon, others reach altogether different conclusions: Studies of regulatory capture consider engagement as a potential source of bias (Braun, 2012, 2013, 2016; Carpenter & Moss, 2014; Dal Bó, 2006; Stigler, 1971).”

“George Stigler (1971, 1976), Sam Peltzman (1976), McCormick and Tollison (1981), and Gary Becker (1983) pioneered the interest-group approach to government, whose principal building blocks—the logic of interest groups and rent seeking—were developed by Mancur Olson (1965) and Gordon Tullock (1967),…”

“Along the lines of George Stigler (1971), it allowed a degree of regulatory capture on the part of the scooter companies which enjoyed first-mover advantages and had greater access to information regarding potential users.”

“Public choice theory (Stigler 1971; Shleifer and Vishny 1998) views regulation as socially inefficient and primarily a vehicle for incumbents and politicians to extract rents for their own benefit (the so-called ‘ grabbing hand ’ ).”

“Moreover, regulation might bias the allocation of resources across occupations — this is even more the case when regulation is shaped by the professional body and is designed primarily for its benefit (Stigler 1971; Pagliero 2011).”

“Due to the impact government decisions have on business (Stigler 1971; Weidenbaum 1980), it is widely believed that firms may struggle to gain sustainable competitive advantage if they do not pay attention to political processes and dynamics within their operating environments (Baron 1995; Hillman…”

“Our paper is the first to estimate a structural model of these welfare e ↵ ects, revisiting questions raised in classic works by Kuznets and Friedman (1945) and Stigler (1971) on licensing.”

“Regulatory capture scholars argue that policy distortion (i.e., giving favors to regulated firms) can occur while regulators serve in the government due to their career concerns in expectation of rewards such as future job opportunities in regulated firms (Dal Bó 2006; Stigler 1971).”

“Regulation of utilities has been an area of interest for scholars across different disciplines, including law (Demsetz, 1968) and economics (Stigler, 1971; Peltzman, 1976; Joskow and Rose, 1987).”

“…intervention, together with increasingly disturbing evidence regarding the results of government intervention [recall once again contributions by Stigler (1971), Posner (1974, 1975) and Peltzman (1976)], paved the way for a cyclical reversal in the balance between public and private solutions…”

“The political connectedness was first found in the influential studies conducted by Tullock (1967), Stigler (1971), and Krueger (1974).”

“11 While regulators likely can unravel bank financial reporting opacity, this may be difficult for non-regulator bank stakeholders because they do not have access to the same information (such as data collected from on-site inspections) and are unlikely to have the same level of training or ability as regulators (Stig…”

“Stigler (1971) describes two main alternative views on regulation of industry.”

“However, private- interest theories of licensing suggest that, by restricting supply, the rule would lead to increases in the wages of incumbents, i.e., grandfathered CPAs who do not invest in any additional training (Friedman (1962); Stigler (1971)).”

“Indeed, the three papers that first developed many of these costs concepts (Stigler 1971; Alchian and Demsetz 1972; Jensen and Meckling 1976) have been cited over 100,000 times in aggregate, according to a July 2019 Google Scholar search.”

“The economic theory of regulation (Stigler 1971; Peltzman 1976) profoundly shaped conceptions and assumptions about the role of politics in regulation by specifying categories of political variables that explain regulatory outcomes and by articulating empirically testable propositions.”

“George J. Stigler (Stigler, 1971), an exponent of the so called ‘regulatory capture school ’ , built his work on that of Marver H. Bernstein – who proposed a first general theory of the life-cycle of regulatory institutions (Bernstein, 1955) in the United States, generalising Gabriel Kolko ’ s…”

“The concept of capture derives from the economic theory of “regulatory capture” which was designed to account for the ways in which regulators often end up working in the interests of the industries they are supposed to be over-seeing on behalf of the public (Stigler 1971).”

“According to Stigler (1971), MNEs, in their effort to promote their interests, would attempt to influence the change of institutions.”

“In particular, it has been shown that politically connected firms receive less regulatory oversight (Stigler (1971) and Kroszner and Stratmann (1998)), lighter taxation (De Soto (1989)), more government aid (Faccio, Masulis, and McConnell (2005)), easier access to credit (Cull and Xu (2005), Khwaja…”