What is Capture Theory?

According to the capture theory a government agency that is established to regulate the industry to protect and benefit the society ends up acting for the interests and benefits of the industry instead. In other words the government agency is captured by the industry players. The regulations that are aimed at bringing more transparency and disclosure is helpful according to capture theory as the industry regulator is empowered to notify guidelines and directions to industry players and can take required actions for reinforcing the same and can punish the defaulting members of the industry.

This is helpful in ensuring for the good of the industry. The regulator works a neutral arbitrator representing the government. This also helps in growth and development of the industry in a best suited manner as the rules laid down by the regulators are always aimed at betterment of the industry while protecting the interests of all the stakeholders and public and government at large. So the regulators as well as the regulations both are able to ensure that the firms are disclosing all the sensitive information relating to social and environment costs and their efforts besides the financial information. So it is advised that government should come up with such a regulations and laws that can ensure that the firms are disclosing the required information that are more important social and environmentally besides the financial information.
But like all the other laws this does have negative side too. It has been seen in many of industries over a period of time that the industry regulator instead had become the protector of the industry than ensuring the benefits of the public, society and environment at large. The regulators come up with such regulations, guidelines and direction that aimed at benefiting the industry singularly ignoring all the other aspects and factors. As the regulators are put in by government laws that are constitutionally legal and backed, so it becomes impossible to stop the regulator even for the governments in many cases. So it is advised that government should not come up with any such laws and regulations that end up distorting the conditions to worse position as the risk of industry regulators playing in hands of industry player is always very high.

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