Regulatory capture: the perversion of our public bodies

 James Lyons-Weiler writes about regulatory capture in the US:

When the airline industry has a disaster, it goes under review by the National Transportation Safety Board. When corporations dump a toxic brew of chemicals into ground surface waters, they are supposed to answer to the EPA. When drug companies’ products - drugs and vaccines - cause more health problems than they prevent or cure, they are supposed to be subject to recall by the FDA.

When regulatory agencies become dominated by the corporations they are supposed to control, that agency has been captured by the industry. The public interest becomes a lower priority than the bidding of the will of the industry, and the industry flourishes - most of the time at the cost of human health. Regulatory capture is killing us, and we are two steps away from the totalitarian fascist Regulatory States of America, James Lyons-Weiler, 24 December

Of course, this is not just a US phenomenon, and perhaps there is an inevitabililty about it, even in the absence of some coherent conspiracy influencing each or all regulatory agencies. People are paid to turn up at the office, and at some point, perhaps years or decades after the founding of the organisation for which they work, the aggregated individual incentives of employees to keep their job and to expand or at least maintain their remit, supplant the stated objectives of the organisation. Then conflict arises between - and within - the employees. Do they stay faithful to the ideals that drove them to take on the job and the stated goals of the organisation? Or do they take the safer option, put their own priorities and those of their family first? Unfortunately, as organisations, be they public- or private-sector, the conflict grows worse with time. In the private sector and in theory, competition should see older, scelerotic corporations die, to be replaced by more nimble upstarts. But regulatory capture means larger corporations have more in common with larger public agencies: neither wishes to rock the boat. The result is a slew of regulations that stifle competition and cement in place the bigger companies and their outdated and anti-competitive ways of doing business. The losers are the public.

There might be ways in the current enviroinment to prevent regulatory capture, but if so they are piecemeal and ineffectual. We are seeing the results everywhere: extreme polarisation in politics, in the academic world; an extreme reluctance by salaried professionals - who owe their livelhioods to the ossified regulatory framework within which they work - to question the prevailing narrative, whether it concerns public health measures, identity politics, climate change or just about anything else. Too many people have a vested interest in avoiding necessary reform. 

Short of revolution, which usually doesn't lead to improved social or environmental well-being, what can be done? Even western-style democratic elections change nothing. The identity of the politicians might change, but their commitment to a scelerotic system doesn't. 

I propose two major steps: 

First: we refine the mission statements and objectives of existing government agencies. We should aim to express their goals in verifiable, quantifiable terms that are meaningful to ordinary people. 

Second: we should inject incentives into the achievement of such goals. My suggestion is that we issue Social Policy Bonds. These bonds would reward the achievement of each organisation's stated goals, regardless of who achieves them and regardless of how they are achieved. 

These are both radical suggestions. If implemented they are likely to bring about a new sort of organisation: one of protean structure and composition, whose every activity would be devoted to achieving its targeted goals as quickly and efficiently as possible. The immediate replacement of our current, corrupted public bodies with those solely aimed at improving people's well-being is highly unlikely to happen. But if Social Policy Bonds were to be issued, whether by groups of interested persons or government, then a transition from the current system to a bond regime is feasible. I outline how that might occur in chapter 4 of my book.