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Communication Policy Reform, Interest Groups, and Legislative Capture

SIEPR Discussion Paper 11-006



There are varied models of regulatory agency behavior. Economists have recently emphasized the incentive-incompatibility of agencies “captured” by regulated entities and a legislature concerned with welfare maximization. This conflict is characterized as a principal-agent problem to which the legislature responds in various ways, including the imposition of administrative procedure laws, oversight committees, and other attempts to control the regulatory bureaucracies. I argue that the principal-agent incentive compatibility model of regulatory capture is naïve. Regulatory agencies are, in general, eager to please or at least appease their congressional oversight and budget committees. It is the committees themselves, and especially their chairs, who capture and are captured by regulated entities, with the objective of funding expensive election campaigns in return for access to a seat at the regulatory policy negotiating table. The existence of the regulatory state and the details of regulatory policy reflect this systemic bias in the political system, which Lawrence Lessig has recently tagged “Type 2” (lawful) corruption.

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