For example, regulators need information to do their jobs, and cooperation with those they regulate is a good way — probably the best way, and almost certainly the easiest — to get it. They try to get along with those they regulate, and that implies some give and take, some understanding and sympathy. Moreover, as regulators needn’t always remain regulators, prospects for later employment also play a role. A while back, my Bloomberg Views colleague Megan McArdle summarized the natural logic of regulatory capture. It’s not really surprising at all (although it may be surprising that we don’t do more to at least try to avoid it).
Economists are rightly proud of this analysis. It’s an example where thinking carefully about ordinary human behavior, as people do their best to meet their goals and get along with one another, goes a long way to explaining an important phenomenon. However, I suspect that economists may be less happy , possibly even a little alarmed, with the direction in which one of their tribe — Luigi Zingales of the University of Chicago — suggests the analysis ought to be extended.
What about economists themselves? Are they the free authors of their ideas, or are they, like regulators, significantly influenced in their thinking by their interactions with business interests? Zingales suggests the latter — and argues that we should, therefore, consider economists’ views with considerable skepticism. Overall, he concludes, the profession and its publications most likely display a significant pro-business and pro-markets bias, because many economists are captured.
Read the whole thing at Medium.com.