Administrative Law Review, Volume 68, Issue 1, March 2016
An essential challenge of the regulatory state is that industry exerts influence that pulls policy in its direction. Observers have long pointed to “captured” regulation that harms the public interest and called for limiting industry influence. The underlying ideal in these calls is uninfluenced regulation that mirrors the public’s perspective. However, this aspiration neglects the public’s benefit from the information that an industry generates as it influences regulation, as well as the incentive that an industry’s benefit from influencing regulation provides it to incur the costs of producing such information. Thus, the standard strategy of insulating regulation against influence creates a tradeoff between closer conformity to the public’s perspective and better information.
This Article introduces the general strategy of harnessing industry influence as an alternative to insulation that alleviates this tradeoff. Harnessing entails making regulation preliminarily biased against industry, with the aim of ultimately unbiased policy as industry influences policy to cancel out the initial bias. With this class of techniques, industry influence is used both to pull regulation in the public’s direction and to stimulate information production. Case studies involving the Commodity Futures Trading Commission, the Securities and Exchange Commission, and hazardous waste legislation support the underlying logic of harnessing: moving the initial position of regulation away from industry in these cases yielded more industry information and final policy further from industry’s preferences. Further analysis of two specific remedies based on these examples—anti-industry executive appointments and statutory penalty default provisions—suggests that harnessing is workable and politically feasible. The value of harnessing warrants not only reorienting research toward solutions in this category, but also separating industry influence and social harm in the analysis of the problem, rather than conflating them in the concept of “capture.”
Date of Authorship for this Version
Tai, Laurence, "Harnessing Industry Influence" (2015). New York University Law and Economics Working Papers. Paper 411.