Read the following extract from an article by Greg Barnes entitled ‘Time for a free market in Tasmanian tourism’, The Mercury, 8 December 2014. Web and then answer the questions that follow.

American economist George Stigler wrote ‘as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit’
Stigler’s theory of regulatory capture is a sound one and we are witnessing its pernicious impact in Tasmania today. The tourism industry in  Tasmania, through its lobby groups the Tourism Council and the Hospitality Association, is embarking on a concerted campaign against . . . ‘rogue’ operators. It wants government to police barriers to entry into the tourism industry.

It is doing so because it wants to curtail competition and it is dressing up its regulatory capture strategy by pretending that it is campaigning on behalf of consumers.

The Tourism Council is an opponent of the website Airbnb. The outrage is pure self-interest of course. Regulatory capture is the curse of modern democracy. It erodes competition, innovation and consumer choice. The Tasmanian Government should ignore the media campaign being run by vested interests that are afraid of the chill winds of market forces.

REQUIRED

1. Pursuant to Capture Theory, why would the Tasmanian Government respond to the demands of the tourism industry?

2. From a Capture Theory perspective, who benefits from government regulation?

3. Would it be possible to ‘prove’ that the Tasmanian Government has been ‘captured’ by the tourism industry, and if so, what evidence would provide such proof?