The Gulf Spill, Regulation and the Revolving Door

Tom Frank, probably the sole progressive on the Wall Street
Journal opinion staff, has an enlightening article on “industry
self-regulation”
in this morning’s Journal.  By now, many of us
know that the Minerals Management Service is charged with collecting
revenues from oil companies and regulating the industry. 

As Frank put it so colorfully, the MMS staffers were
“apparently trying to give new meaning to the old Washington saing about
being ‘in bed with industry.'”  A bit of research revealed that it was
another case of industry self-regulation.  The current president of the
relevant industry group is a former director of the MMS, and the man he
replaced was also a former director of the MMS.

As Frank says, the economists call the issue “regulatory capture.” 
It occurs when a governmental agency created to act in the public
interest acts in favor of the commercial interests that dominate the
industry.  Self-regulation doesn’t work in law.  Doesn’t work in
medicine.  Doesn’t work in agriculture.  Certainly doesn’t work in
business.  Etcetera and etcetera. 

But, as Frank points out, what you hear is not about “regulatory
capture” from today’s commentators.  Rather than emphasize the obvious,
that self-regulation never works, the commentators return to that “hoary
old truism of the backlash: Government never works.”

Obviously, that’s a political move.  The more we bash government, the
more capitalistic opportunities.  The less trust in government we
generate, the more we can ignore the real problems.

What’s really going on?

Aside from the political opportunities that “government never
works,” provides for all the anti-government crowd, this is a classic
thinking error: the fundamental attribution error.  Errors come and are
believed when we fail to look at the situation.  Work for the government
for awhile, don’t be too tough on regulation, then business will
provide you with a better paid opportunity.  The situation is a perfect
set-up for industry.  Besides, we have a long history of taking
advantage of governmentally provided opportunity.  Way back to the
Gilded Age, the 1880s and 90s. 

Drawing conclusions is always a suspect process.  Always ask the
question, “how else can we interpret that event.”

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