Public Interest Theory Of Regulation Analysis

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There has always been a debate around what the ultimate goal of a regulatory process should be. Firstly, whether it is the general good of society writ large that is pursued, more importantly, whether the conception of what is ‘good’ for the public must be left to the regulator or if he must bow down to the public’s conception of their own good even if he disagrees and secondly, whether regulation implicates allowing special interests to contest in an arena in order to use government power for narrow advantages.
Crudely put, the first normative scenario is what comprises the ‘Public Interest’ theory of regulation and the subsequent scenario is what comprises the ‘Capture’ theory of regulation, and is what has been dominant for the past 25 – 30 years of the regulatory process.
Regulation may be surmised to be the exercising of the collective power of the government in order to keep market failures in check, to protect the polity from monopolistic market behaviour and to suppress the detrimental effects of externalities.

Division of interests is made along the lines of two variables. Private and Public interests are separated along the lines of distinguishing kinds of motivation; and General and Special interests to distinguish between the kinds of political dominance.
When private individuals hold public positions, they have private preferences that are separate from the society they reckon to serve in the first place. These preferences and interests are self- regarding in nature. Public interests however are those preferences of individuals that are made keeping their and others condition and behaviour in mind. The context setting here will a...

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...Ministry for Corporate Affairs in India, headed by Sachin Pilot. Such former employees who worked on higher rungs of positions in the companies would have had access to all information regarding profits, audits, management of funds etc. To use such privileged knowledge and help in formulating policies for the very companies that they worked for is a classic case of regulatory capture. The ‘comply or explain’ clause was successfully included. It gave companies who didn’t want to part with their profits, enough opportunity to explain ‘why’ they couldn’t do so any fiscal year.

It would be too naïve to claim one theory superior to the other. Although, on the basis of their ability to underpin realities that exist in society and the profound diverse ways in which policies can be manipulated to suit vested interests, the Capture Theory of regulation helps objectively.
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