Editing Government failure (section)

=== Regulatory ===
[[Regulatory arbitrage#Regulatory arbitrage|Regulatory arbitrage]] is a regulated institution's taking advantage of the difference between its real (or economic) risk and the regulatory position.<ref>• [[Stephen Breyer]] (1979). "Analyzing Regulatory Failure: Mismatches, Less Restrictive Alternatives, and Reform," ''Harvard Law Review'', 92(3), pp. [http://www.uiowa.edu/~c030137/breyer.pdf 547–609]{{dead link|date=December 2017 |bot=InternetArchiveBot |fix-attempted=yes }}.<br>&nbsp;&nbsp;&nbsp;• [[Joseph E. Stiglitz]] (2009). "Regulation and Failure," in David Moss and John Cisternino (eds.), ''New Perspectives on Regulation'', ch. 1, pp. [http://tobinproject.org/sites/tobinproject.org/files/assets/New_Perspectives_Ch1_Stiglitz.pdf 11–23.] Cambridge: The Tobin Project.</ref>

[[Regulatory capture]] is the co-opting of regulatory agencies by members of or the entire regulated industry. [[Rent seeking]] and [[rational ignorance]] are two of the mechanisms which allow this to happen. [[Rent seeking]] and [[rational ignorance]] are two of the mechanisms which allow this to happen. Rent extraction positively correlates with government size even in stable democracies with high income, robust rule of law mechanisms, transparency, and media freedom.<ref>{{cite journal|first1=Alexander J.|last1=Hamilton|date=2013|url=http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2013/01/07/000158349_20130107132037/Rendered/PDF/wps6305.pdf|title=Small is Beautiful, at Least in High-Income Democracies: The Distribution of Policy-Making Responsibility, Electoral Accountability, and Incentives for Rent Extraction|publisher=The World Bank Institute|id=Policy Research Working Paper 6305|quote=This paper hopes to contribute towards an explanation of these empirical regularities by developing and testing a new contextually enriched career concerns model of the political economy of public policy-making.}}</ref>

Regulatory risk is the risk faced by private-sector firms that regulatory changes will hurt their business.<ref>{{cite web|url=http://www.economist.com/research/Economics/alphabetic.cfm?LETTER=R#REGULATORY%20RISK |title=Regulatory risk |publisher=Economist.com |access-date=2013-10-21}}</ref>