ACCOUTING THEORY

Accounting Theory

Capture Theory and Economic Interest Theory

Introduction

The course of the study will focus on capture theory and economic interest theory. The study will analyze the two theories in relation to tweedie the unrelenting. The capture theory was developed by a famous economist George Joseph Stigler. The theory states that the powerful people and interest groups will use the coercive and regulatory powers of the government to shape regulations and laws in a manner that is beneficial and advantageous to them. The economic interest theory is an economic theory that was first developed by Arthur Cecil Pigou. The theory based on the assumption that regulations supplied in reaction to the demand of people for the adjustment and correction of inequitable and inefficient practices prevailing in the market (Bruce 1978, pp. 20-36). The economic interest theory assumed to benefit the society on a broad scale and on a large level rather than specific vested interest of the power people of the society. The theory considered to be the one that is representing the interest of the common people and society as a whole.

Discussion

Western market capitalist societies popularly viewed as the citadels of free enterprise. The economic good achieved by economic agents pursuing self-interest in a laissez faire marketplace-a marketplace free of government intervention and involvement. The reality of Western market capitalism is fundamentally different from this prevailing view. Economic agents have not been able to pursue their objectives and conduct their affairs free of the watchful eye or the strong hand of government. Governments have created numerous boards, committees and commissions to regulate the activities of economic agents. This paper examines several theories of regulation and considers their relevance to Australian industrial relations. Regulation involves the interaction of four different entities or groups (Bruce 1978, pp. 20-36). They are the government (or governments) which brings into being regulatory agencies, the general public which supposedly benefits from regulation, the groups or organizations whose activities regulated, and the various individuals who undertake the task of regulation.

The Capture Theory

The capture theory (Economics Theory of Regulation) describes how interest groups and political actors will use the means of regulation and the coercive power of states to guide the laws and rules in ways that promote their personal interests. The capture theory sates that a particular industry can reap exclusive benefits from regulation if it can imprison the agencies that are involved in regulation. This can be achieved if the technical knowledge and political influence makes the regulatory agencies depend on it. This theory of regulation now included in the economical choice theory. George Stigler is also recognized in the field of industrial organization. In 40 years, he became interested in Duopoly and industrial organization (Amitai 2009, pp. 319-323). He analyzed the functioning of markets in terms of causes and effects of economic regulation. It's now recognized as the leader and pioneer of the observed work in industrial structures.

For Stigler, the regulation must be regarded as producing a service of redistribution policy, offered by politicians and civil ...