Final answer:
The usual cause of regulatory capture is a combination of lack of government oversight, corruption within regulatory agencies, and inadequate enforcement of regulations. These factors enable regulated industries to influence and control the regulations they're subject to, leading to reduced competition and consumer representation.
Step-by-step explanation:
The usual cause of regulatory capture is multifaceted. It arises when industries that are ostensibly regulated exert substantial influence on the regulations that govern their own operations. This can happen through several mechanisms:
- Lack of government oversight, which creates a vacuum that industries can fill to shape regulations in their favor.
- Corruption within regulatory agencies, where industry officials may bribe regulators or provide other illegal incentives.
- Inadequate enforcement of regulations, allowing firms to operate with a significant degree of latitude and control over how rules are applied and enforced.
During the regulation of the airline industry, for example, the industry itself played a pivotal role in suggesting appointees to the regulatory board, lobbying the board, providing information for board decisions, and offering jobs to board members after their service. Thus, all of the listed factors contribute to regulatory capture. This not only allows existing companies to set high prices and limit competition but also severely weakens the representation of consumers' interests.