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The public interest theory of regulation claims that government regulation acts to protect and benefit the public. [1] The public interest is "the welfare or well-being of the general public" and society. [2] Regulation in this context means the employment of legal instruments (laws and rules) for the implementation of policy objectives.
Contrary to regulatory public interest theory, this holds that the provision of regulation adapts to the industry's needs, that is, both the legislator and regulator are controlled and captured by the industry. The basic view of the theory is that the regulator gets captured no matter how the regulatory scheme is designed.
The mainstream economic theory of regulation treats politicians and administrators as brokers among interest groups. [4] [5] Bootleggers and Baptists is a specific idea in the subfield of regulatory economics that attempts to predict which interest groups will succeed in obtaining rules they favor. It holds that coalitions of opposing interests ...
Regulatory capture is the process through which a regulatory agency, created to act in the public interest, instead advances the commercial or special concerns of interest groups that dominate the industry it is meant to regulate. [2]
This is a clear dichotomy, as one can be self-interested in one area but altruistic in another. By contrast, public choice theory models government as made up of officials who, besides pursuing the public interest, may act to benefit themselves, for example in the budget-maximizing model of bureaucracy, possibly at the cost of efficiency. [1] [13]
In social science and economics, public interest is "the welfare or well-being of the general public" and society. [1] While it has earlier philosophical roots and is considered to be at the core of democratic theories of government, often paired with two other concepts, convenience and necessity, it first became explicitly integrated into governance instruments in the early part of the 20th ...
Stigler is best known for developing the Economic Theory of Regulation (1971), also known as regulatory capture, which says that interest groups and other political participants will use the regulatory and coercive powers of government to shape laws and regulations in a way that is beneficial to them.
Fellmeth's theory of regulation, including advocacy of presumptive reliance on market forces, with an analysis of market flaws that warrant intervention and a preferable ordering of those options, is in his early article: A Theory of Regulation: A Platform for State Regulatory Reform.