1962, Kolko published his Triumph of Conservatism, which advanced the heretical claim that “business leaders, and not the reformers, inspired the era’s legislation regulating business.” In fact, Kolko argued, “regulatory movements were usually initiated by the dominant business to be regulated.”
Kolko, though, mocked the idea that Sinclair had “brought the packers to their knees.” In fact, he concluded that the biggest meatpackers “were warm friends of regulation” because only the biggest packers, not their smaller, less organized competitors, had the resources to comply with the new restrictions.
Regulation was a way of restraining competition and protecting market share. Kolko observed that Swift and its fellow industry giants celebrated passage of the Meat Inspection Act of 1906 with advertisements declaring: “It is a wise law. Its enforcement must be universal and uniform.”
In this first book and in a more focused study titled Railroads and Regulation, published in 1970, Kolko offered a sweeping indictment of what he believed to be a naïve, simplistic understanding of the relationship between government and business. Kolko argued that regulatory agencies overwhelmingly served the interests of big business, which adeptly used them to fix prices and restrain competition.
Railroads, for example, worked with the Interstate Commerce Commission to mute competition, ensuring higher profits via stable freight rates. For other industries, incumbent firms embraced regulation as a way of rewarding their capital investments in cutting-edge technology. For example, the condiments king Henry J. Heinz and brewer Frederick Pabst benefited greatly when Congress passed food purity laws that enshrined their methods of manufacturing as the new standard, leaving smaller rivals at a distinct disadvantage.
In 1971, Stigler published an article titled “The Theory of Economic Regulation” that provided a theoretical understanding for why regulation almost always ended up serving the interests of big business. This became known as the theory of regulatory capture, which held that large, incumbent firms typically used regulations to thwart competitors. The analysis went on to become one of the most-cited economics articles ever written, helping Stigler win the Nobel Prize in Economic Sciences in 1982.
Not that you would know any of this from watching Congress lap up Sam Altman’s pleas for regulation of the blossoming AI industry. Instead, our senators swallowed the tech titan’s testimony with all the skepticism of a bunch of slack-jawed yokels listening to a carnival barker.