Academic journal article
By Nixon, David C.; Howard, Robert M.; DeWitt, Jeff R.
Journal of Public Administration Research and Theory , Vol. 12, No. 1
REGULATION AND IRON TRIANGLES
Although some scholars have argued to the contrary (Pertschuk 1982; Kelman 1982; Seligman 1995), many political scientists and economists have long argued that regulatory agencies exist to benefit and serve the regulated industry. Specifically, interest groups have the power, motivation, and ability to influence the regulatory process to benefit the particular industry rather than the public. Theodore Lowi, in his self-styled polemic The End of Liberalism (1969), argued that these interest groups corrupt the democratic process, preventing just and fair public policy.
More specifically, many policy scholars have posited the existence of an iron triangle (McCool 1990; Meier 1985; Mazmanian and Sabatier 1980; McConnell 1966). An iron triangle represents a symbiotic relationship between a regulated industry, the key congressional committees or subcommittees, and the agency in charge of the regulated industry. Through a convergence of interests, membership, and access, the iron triangle dominates the policy-making process and prevents any change that hurts or impairs the interests of the regulated group. As two scholars point out, "policy subsystems tend to reduce or eliminate conflict by concentrating economic and political power in the hands of a few individuals who tend to have overlapping interests" (Fritschler and Hoefler 1996, 5). Bernstein (1955) described the powerful collection of political and personal incentives that inexorably lead to such agency capture.
Many economists have argued that the participation of interest groups in the regulatory process leads to increased consumer cost and harm to the public and that agency capture is endemic to regulation (Stigler 1971; Tullock 1967; Kreuger 1974). Kolko (1965) makes a compelling case that the very existence of an agency is often rooted in demands by the industry for self-beneficial regulations. Indeed, Dahl (1989) suggested that interest group influence in democracy itself is economically stifling--presumably a direct result of regulatory capture.
As an alternative to the iron triangle depiction, Heclo and others have suggested that modern American policy is established among "issue networks," rooted in exchanges of technical information and expertise, in which no one actor necessarily dominates policy decisions (Heclo 1978; Heinz et al. 1993). However, even after a decade of deregulation, particularly in the airline and trucking industries, Peltzman, Levine, and Noll (1989) continued to argue for capture theory's vitality, albeit with some modification.
Most bureaucratic control literature also views the preferences of the dominant organized interests as the driving force behind bureaucratic policy making. Either because Congress explicitly works on behalf of those interests (Weingast 1981 and 1984; Weingast and Moran 1983; Moran and Weingast 1982; Calvert, Moran, and Weingast 1987) or because Congress uniquely empowers those interests in bureaucratic decision procedures (McCubbins, Noll, and Weingast 1987 and 1989; McCubbins and Schwartz 1984), bureaucratic policy choices have been portrayed as very responsive to the needs and demands of the dominant interests of the regulated industry.
Researchers in this field have demonstrated bureaucratic fealty to congressional committee preferences (Calvert, Moran, and Weingast 1987) and have highlighted and explicated the nature of the advantages Congress confers on like-minded (usually dominant) organized interests in their interaction with agencies. However, interest group influence over specific regulatory decisions generally has not been documented in a careful manner, taking into account the institutional structure that shapes the bureaucratic policy-making process. We propose to do just that, in the case of the rule-making process of the Securities and Exchange Commission (SEC). (1)
Kerwin (1999, 188) succinctly stated the most straightforward hypothesis:
A strong case can be made that [business and trade associations'] superior resources and experience lead to a degree of influence in rulemaking that others cannot match. …