The following text is about political economy.
"Regulatory capture" describes how regulatory agencies come to serve the interests of the industries they regulate rather than the public. This can occur through various mechanisms: industry experts are recruited as regulators; industries fund research that shapes regulatory assumptions; post-government employment incentives bias regulators toward leniency. The phenomenon challenges simple models of government as correcting market failures—regulation can create its own failures. Yet complete deregulation isn't necessarily the answer, as the original market failures that motivated regulation remain. The challenge is designing institutions resistant to capture while maintaining regulatory capacity.
Why isn't deregulation a complete solution to regulatory capture?
Deregulation would increase regulatory capture
The original market failures that justified regulation would remain unaddressed
All regulations always serve the public interest
Industries never influence regulatory agencies
Correct Answer: B
Choice B is the correct answer. "Complete deregulation isn't necessarily the answer, as the original market failures that motivated regulation remain."
- Evidence: Original market failures would persist.
- Reasoning: Removing regulation doesn't fix what regulation was meant to address.
- Conclusion: Market failures requiring regulation still exist.
Choice A is incorrect because deregulation removes regulation, not captures it. Choice C is incorrect because capture shows regulations can serve industries. Choice D is incorrect because industry influence is the core of capture.