Public Interest Theory Of Regulation
Theories of Regulation By Evan Gleeson Student No. 14230177 Padraic Kenna Word Count: 5,290 Introduction A theory of regulation is a set of propositions or hypotheses about why regulation emerges, which actors contribute to that emergence and typical patterns of interaction between regulatory actors. The theories of regulation can be divided into three main categories ; public interest theories, private interest theories and institutionalist theories. All three categories have in common a concern to uncover the processes that lead to the adoption of a particular regulatory regime. Where regulation is understood essentially as state intervention into the economy by making and applying legal rules, theories of regulation can be seen as an …show more content…
The economic version of public interest theory is probably the most well known. It suggests that regulation is a response to imperfections in the market known as market failures. Correction of these failures increases the community’s general welfare and is thus in the public interest. Also those who press for regulation in response to market failures are agents of the public interest. Market failures can be defined by categories of monopoly, externalities and public goods. …show more content…
On this view, regulation may or may not promote the public interest but if it does it is a coincidence. This is a central aspect of private interest theories and means that any connection between regulatory intervention and the public interest is a contingent one, demonstrable through empirical and context specific enquiry only. Private interest theories have tended to stress the ease with which ‘regulatory failure’ and ‘regulatory capture’ occur. Regulatory capture happens when officials within regulatory institutions who are charged with promoting collective welfare develop such close relationships with those they regulate that they promote the narrow interests of this group instead of the public interest of the broader community. Public interest theories stress market failure and the capacity of regulation to correct such failures. Private interest theories stress regulatory failure and the tendency of regulation to benefit narrow special interests rather than to promote collective
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