Question

1. Suppose the Environmental Protection Agency was led by a former lobbyist who, prior to leading the EPA, mostly represented coal companies. Which theory of regulation could this example validate?  
   1. capture theory
   2. economic theory
   3. iron triangle theory
   4. normative analysis as a positive theory

Answer 1

Regulatory capture is a form of government failure which occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or political concerns of special interest groups that dominate the industry or sector it is charged with regulating. When regulatory capture occurs, the interests of firms, organizations, or political groups are prioritized over the interests of the public, leading to a net loss for society.

Former's lobbyist association with coal companies prior to EPA draws wrong attention from the interest groups leading to government failure and net loss for society.

Correct Ans - A