What is Regulatory Capture?

Here is a short definition, as cleanly summarized at Wikipedia:

“…Regulatory capture is a form of political corruption that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or special concerns of interest groups that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure; it creates an opening for firms to behave in ways injurious to the public (e.g., producing negative externalities). The agencies are called “captured agencies”….”

Last year, a Washington Post article by Will Baude took another look at regulatory capture, noting that the problem may in fact go further, into academia and the legal profession. Here is a paragraph from his article [PDF], where he is quoting University of Chicago economist Luigi Zingales:

“When economists talk about regulatory capture, they do not imply that regulators are corrupt or lack integrity. In fact, if regulatory capture was just due to illegal behavior, it would be easier to fight. Regulatory capture is so pervasive precisely because it is driven by standard economic incentives, which push even the most well-intentioned regulators to cater to the interest of the regulated. These incentives are built in their positions. Regulators depend upon the regulated for much of the information they need to do their job properly. This dependency creates a need to cater to the information providers. The regulated are also the only real audience of the regulators, since taxpayers have all the incentives to remain ignorant. Hence, the regulators’ on the job performance will be naturally defined with the regulated in mind, pushing the regulators to cater to the interest of the regulated. Finally, career incentives play a big role. The regulators human capital is highly industry specific and the best job for people holding that specific human capital are with the regulated. Hence, the desire to preserve future career options makes it difficult for the regulator not to cater to the regulated.”

Examples of FAA’s Regulatory Capture

FAA is a captured agency. Indeed, a careful study of FAA’s history suggests that this agency has nearly always been serving aviation interests first, frequently with complete indifference to the negative impacts upon the general public.

One early example was fifty years ago, in 1964. The Av-Gov Complex wanted to make money by developing supersonic air travel. So, they got the Military-Industrial Complex to help out, to use military aircraft to ‘test’ the impacts of sonic booms on people in Oklahoma. Very similar to how today, FAA is ‘testing’ noise impacts of their flawed and oversold NextGen technologies, in Phoenix and Flushing and elsewhere. Check out this recent article at Gizmodo.com:

An example from a few years ago is the Colgan crash in Buffalo, in January 2009. Fifty were killed in this horrific accident which plainly exposed a bucketload of failure within commercial passenger aviation: FAA’s lack of effective oversight, underpaid and chronically fatigued feeder pilots, airline deceptive marketing (e.g., Continental was selling Colgan seats as ‘Continental’ flights), and more. The regulatory capture aspect of this was well defined in a Buffalo News Op/Ed in July 2014.

And the latest example is the ongoing NextGen implementation debacle. The use of GPS satellite signals for air navigation began in earnest in 1994. FAA spent a decade fine-tuning their funding proposal, then finally got Congress’ blessing (i.e., funding authorization) in 2003. They spent a few more years lining up needed support from their employee unions (NATCA, PASS), and also made deals with airline and manufacturer stakeholders to get their ‘collaboration’. All of this meticulous groundwork by FAA was to ensure none of the stakeholders would oppose what FAA was preparing to take to Congress. With that done, in early 2012, FAA got Congress to pass ambiguous legislation that waives the longstanding requirement to conduct public environmental review of new air traffic routes. Which brings us to today’s NextGen mess.

FAA has done years of hard work for the airlines (and for the manufacturers who are raking in $billions$ for new systems and mandated products). And the result? Thousands of residents in communities across the country have risen loudly AFTER FAA has imposed new, noise-impactful NextGen routes. Astonishingly, even after local officials and senior Senators send written appeals to FAA, all FAA does is delay fixing the problems created by NextGen; in fact, they salt the fresh wounds by continuing to aggressively sell NextGen as ‘green’, and by conducting months and years of ‘studies’.

Just like in 1964.

FAA imposes an impact, and then they waste airline passenger taxes to spend years inconclusively ‘studying’ the impacts.

It seems that, at FAA, regulatory capture is more than just a phenomenon: it is an entrenched culture.

See also… (blue dates link to online content)

10/5/2012
Aviation Impacts & FAA’s Regulatory Capture: the Reasons the aiReform.com Website was Created
Early post from the first month of aiREFORM.com, with a deeper look at FAA history and citing numerous examples of FAA’s Regulatory Capture.