Regulatory economics theory

First, the regulatory capture theory of traditional regulatory economics

(A) the meaning of government regulation capture

The capture of government regulation refers to the behavior of some special interest groups (mainly regulated enterprises) to provide their own regulation by "capturing" legislators and regulatory agencies in the process of regulation because legislators and regulatory agencies also pursue the maximization of their own interests.

(B) the emergence of government control capture theory

The emergence of government control capture theory is related to the research of control objectives.

The goal of government regulation in the theory of public interest regulation

The goal of Chicago school on government regulation

(C) stigler's government control capture theory.

1. Two important assumptions:

First, the basic resource of the government is coercive power, and various interest groups can improve their welfare by persuading the government to use its coercive power.

Second, all interest groups are rational when choosing actions that maximize their own interests.

2. The main means for enterprises to capture government regulators:

Providing votes, campaign funds and campaign funds for government officials.

3. Enterprises can gain four benefits by capturing regulators: direct monetary subsidies; Restrictions on substitutes for products produced by the industry or subsidies for supplementary products; Fixed product price; Control of new competitors entering the market.

(D) Pelcman's theory of government control.

1. Theoretical assumption:

Simplify interest groups into enterprises and consumers, and simplify regulators into legislators.

Interest groups and regulators are both economic men who pursue the maximization of their own interests.

Enterprises pursue profit maximization;

Consumers pursue the maximization of consumption surplus;

Regulators seek the broadest political support, which is reflected in the pursuit of maximum votes.

2. Basic conclusion: interest groups provide political support to regulators in exchange for obtaining their own regulatory legislation. Government supervision is a system favored by interest groups and regulators.

(E) Becker's regulation theory

The essence of regulation lies in the competition among interest groups, and it is the relative influence of interest groups that determines government regulation activities, not just market failure. This influence is not only determined by the welfare effect of regulation, but also depends on the relative efficiency of interest groups in putting pressure on legislators and regulators.

(VI) Defects of the traditional capture theory of regulatory economics

1. Ignoring the information asymmetry and its influence in the process of regulation, we can't use the analytical framework of principal-agent theory to analyze the problem of regulation capture.

2. Lack of further detailed analysis of regulatory supply (regime and regulatory agencies), or just regard it as a "black box", thus ignoring the complex principal-agent relationship between the bureaucracy as the principal and its agent-regulatory agencies.

3. Defects of theoretical system: lack of theoretical analysis framework with consistent internal logic.

Second, the regulatory capture theory of new regulatory economics

(A) Information asymmetry in the process of supervision

First, the information that regulators know about regulated enterprises is far less than the corresponding information that regulated enterprises know.

Second, there is also information asymmetry between the regulatory agency as an agent and the government as a client (such as Congress).

(B) the two-tier principal-agent relationship in the process of government supervision

First, the principal-agent relationship between enterprises and government regulatory agencies.

The second is the principal-agent relationship between government regulators and Congress.

(C) the emergence of dual principal-agent and regulatory capture

Regulators may hide information from Congress to gain the trust of industry and consumer groups; Or these interest groups bribed the regulatory agencies to provide information beneficial to them to Congress, thus causing regulatory capture.

(4) The objective assumption that Congress is the principal:

Suppose that the goal of Congress is to maximize the social welfare function (the sum of the surplus of consumers, regulators and producers). Therefore, the principal-agent relationship between Congress and regulators can be expressed as the principal-agent relationship between the public and regulators.

(five) the information intermediary function of the regulatory agencies:

By playing the role of "information intermediary" or undertaking the task of supervision as an "authorized regulatory agency", the information vacuum between the public and the industry can be filled, and the problem of "hitchhiking" of consumers' collective choice can be eliminated to a great extent.

(six) the right to take pictures of the regulatory agencies.

The motivation to collect industry information may be insufficient; Even if it has real information in these fields, it will not necessarily report it to Congress truthfully, nor will it necessarily use this information for personal gain. Regulated enterprises may also bribe and buy off regulatory agencies.

If Congress, as the principal, can't make accurate judgments and choices on different regulatory policies, regulators may choose regulatory policies that are beneficial to interest groups and unfavorable to the public, or even harm the public interest.

The focus of regulatory economics research should not be to judge whether there is a threat of regulatory capture, but how to design a set of corresponding regulatory mechanisms to reduce or avoid the occurrence of regulatory capture.

(7) The probability of regulatory capture is related to the incentive intensity of regulatory contracts.

N High-intensity incentive contracts will enable enterprises to obtain high information rents.

N Contracts with low incentive intensity have clear provisions on the accounting of specific costs, and there is little room for contract change, so the probability of regulatory capture is also small.

(8) Consumers' collective choice of banks and its offsetting effect on regulatory capture.

N Consumer groups are motivated to resist the purchase behavior of regulated enterprises;

N The behavior of consumer groups has the problem of collective choice;

N may lack the necessary information to evaluate different regulatory policies;

Third, the reference of new regulatory economics to regulatory capture theory

1. Reduce the judgment authority of regulatory agencies.

When designing the supervision mechanism, we should try our best to reduce the dependence on the private information of the supervision institution and reduce its judgment authority. However, this may create a very bureaucratic institutional environment and inhibit the effectiveness of regulatory agencies.

2. Provide certain incentives for regulators and weaken their motivation to be captured.

Let regulators share part of the interests of other interest groups, so that they will not be biased towards a specific interest group. However, there are some difficulties in determining the number of incentives for regulators; Even if it is easy to measure, it may lack a suitable comparison benchmark.

3. Increase the transaction cost of regulating and capturing both parties.

Increase the cost of regulating the transaction between the captor and the captured party, especially the transaction cost of private transactions between the two parties.

But doing so may also generate new other costs.

4. Reduce information asymmetry between regulators and customers.

Require regulatory agencies to adopt very open and transparent regulatory procedures, including holding public regulatory hearings to listen to the opinions of all parties on supervision;

Extensive use of consulting materials; Degree of independent appeal;

Detailed written explanation of relevant decisions, and so on.

5. Choose the right supervision contract

If the purchase threat of controlled enterprises is serious, some control contracts with low incentive intensity should be adopted; The adoption of high-intensity incentive contracts needs to be combined with administrative and bureaucratic systems that can alleviate the problem of regulatory capture.

Fourthly, the regulatory capture theory of new regulatory economics and the regulatory reform of public utilities in China.

Lafon and Taylor pointed out in the preface of Incentive Theory in Government Procurement and Regulation (Chinese version) that the liberalization of public utilities in China needs advanced control methods;

The new regulatory economics provides China economists with tools and methods to develop China's regulatory theory and practice.

In the period of economic transition, the regulatory capture space and probability of monopoly industries in China have increased. The reason for this is the following：

Most regulated enterprises are born out of state-owned enterprises that integrate government with enterprise. Serious information asymmetry; Complexity of principal-agent relationship; Lack of existing regulatory agencies and related systems.

1. Deepen the reform of property right system, form an effective property right structure and corporate governance structure of natural monopoly enterprises, and form a reasonable principal-agent relationship.

2. While further breaking monopoly and introducing competition, we should gradually establish a set of relatively perfect government control system and laws and regulations system, especially an effective incentive control system for industries that need to be regulated.

3. Further strengthen and improve the hearing system and other systems that are conducive to increasing regulatory transparency and reducing information asymmetry.