Define regulation and it’s problems , Microeconomics

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Regulation is not a panacea.  There are troubles with rate regulation.  In our litigious society, the legal proceedings contained in rate regulation are not inexpensive for any of the parties involved, the state, public interest groups, and the firm.  Because of the closeness of the legal advocates, economists, and others contained in the litigation of rate cases, there have been accusations that the public utility commissions have been over-taken by the industries they regulate.  The capture theory of regulation is that the retired executives, and economists and lawyers who have made their mark defending utilities have been appointed to public utility commissions, thereby permitting the utilities to regulate themselves.  While there have been instances where conflicts of interest have been noted, this "capture theory of regulation" probably overstates the relations among the industries regulated and the public utility commissions in most jurisdictions.  

 


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