Archive for October, 2014

The legitimacy of capture

Wednesday, October 29th, 2014

EconTalk on regulatory capture and economists:

Incentives are important to think about, because getting incentives wrong can mean pitting another human against you, and by symmetry there is no telling who would win when that happens.

Immediate material gains are a part of incentives which are relatively easy to understand. What’s discussed in this podcast under the label of capture is the fact that there are systematic influences that go beyond immediate individual gain. Regulators tend to come to sympathize with the regulated, because in their shared knowledge and social circles they are closer to each other than they are to the rest of us.

This is a very tasty idea when you think about how any ideology can interpreted as capture. To be ideological is to have an opinion based on a framework, more so than on objective data. Often this is the right thing to do, because data is too noisy in individual cases to be leaned on too heavily (

I think the solution is not to try and be neutral – that is impossible. Rather, we should declare our roles in order to detach our egos from them. We do so by speaking in such manner, for example about Uber:

  • speaking as a libertarian, I think people should have the right to use whatever tools they want as long as it’s a transaction between willing parties
  • speaking as a consumer, I like that I can call cars that are cheaper than cabs
  • believing in the rule of law, I think that Uber is violating the spirit of taxi medallions, and the state should step in to either compensate the cabs for a lost property right, or enforce those rights
  • speaking as an anti-monopolist, I think that Uber is getting too powerful

It would be nice to have a list of these tropes, similar to