We've written occasionally about the notion of regulatory capture. Investopedia defines the concept this way:
Regulatory capture is a theory associated with George Stigler, a Nobel laureate economist. It is the process by which regulatory agencies eventually come to be dominated by the very industries they were charged with regulating. Regulatory capture happens when a regulatory agency, formed to act in the public's interest, eventually acts in ways that benefit the industry it is supposed to be regulating, rather than the public.
Public interest agencies that come to be controlled by the industry they were charged with regulating are known as captured agencies. Regulatory capture is an example of gamekeeper turns poacher; in other words, the interests the agency set out to protect are ignored in favor of the regulated industry's interests.
The Wall Street Journal cited Stigler in a commentary about Regulatory Capture 101:
Enter George Stigler, who published his famous essay “The Theory of Economic Regulation” in the spring 1971 issue of the Bell Journal of Economics and Management Science. The University of Chicago economist reported empirical data from various markets and concluded that “as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.”
Recently, the Minnesota-based North American High Speed Rail has taken regulatory capture to its logical extreme. The scheme to build and operate a private high-speed passenger short line between the Twin Cities and Rochester has opened a "public comment" period that the corporation runs by itself.
So the corporation hasn't just tried to control the regulatory process, this ghost train has simply set up its own regulatory process. Isn't that special?
In fact, it is special, if we are to trust the definition of "public comment" from Wikipedia:
Public comment is a specific term of art used by various government agencies in the United States, a constitutional democratic republic, in several circumstances. It is sometimes called "vox populi". Generally these circumstances are open public meetings of government bodies which set aside time for oral public comments, or comments, usually upon documents. Such documents may either be reports such as Draft Environmental Impact Reports (DEIR's) or new regulations. There is typically a notice which is posted on the web and mailed to more or less ad hoc lists of interested parties known to the government agencies. If there is to be a change of regulations, there will be a formal notice of proposed rulemaking.
The basis for public comment is found in general political theory of constitutional democracy as originated during and after the French Enlightenment, particularly by Rousseau. This basis was elaborated in the American Revolution, and various thinkers such as Franklin, Jefferson  and Thomas Paine  are associated with the rejection of tyrannical, closed government decision making in favor of open government. The tradition of the New England Town Hall is believed to be rooted in this early American movement, and the distillation of formal public comment in official proceedings is a direct application of this format in the workings of public administration itself.
What does it mean when a corporation is running a "public comment" period? We think it made be the ultimate trolling of citizens by a private interest.
Regulatory control lite
Meanwhile, legislators are working on creating some sort of public oversight for this rogue zombie train; unfortunately, the private corporation would fund the working group. Heather Carlson reports in Bill creating high-speed rail working group advances:
A bill establishing a high-speed rail working group cleared it’s [sic] first legislative hurdle on Wednesday despite concerns from some lawmakers that the legislation is not needed.
Members of the Senate Transportation and Public Safety Committee peppered Red Wing DFL Sen. Matt Schmit with questions about his bill. The legislation would establish a 15-member advisory group focused on a potential high-speed rail line from Rochester to the Twin Cities. The goal behind the bill would be to have the private company that is considering building the rail line — the North American High Speed Rail Group — fund the working group. Schmit told committee members the cost could amount to a couple hundred thousand dollars. . ...
Others said they wanted to see changes to the bill to address concerns raised by residents who live along the proposed corridor. That would include making sure the names of donors who pay for the working group are disclosed and requiring the working group to be established as soon as the private company applies for any sort of permit from the Minnesota Department of Transportation — not just when they begin negotiations for right-of-way to build the line.
“The biggest thing is this is a hugely, hugely expensive proposal and generally before investing this much effort, there’s a lot more discussions that comes along,” said Sen. Mary Kiffemeyer, R-Big Lake.
Schmit told senators he is open to changing his bill to address concerns being raised by the committee. But he rejected the idea that his bill is not necessary. He said there was a lack of communication and transparency about Zip Rail, a proposed public high-speed rail line from Rochester to the Twin Cities. Work on that project has been suspended by the state and Olmsted County due to a lack of funding. Still, Schmit said that experience highlights the need for a working group that takes into account the concerns of stakeholders who live along the route.
Wait for it:
The bill would establish a 15-member advisory working group that would be overseen by the University of Minnesota Center for Transportation Studies. The group would include a county board-appointed resident from each of the following counties: Dakota, Dodge, Goodhue, Hennepin, Olmsted and Ramsey. The group would also include lawmakers, state agency representatives and someone from the Center for Transportation Studies.
According the 2015 business plan the North American High Speed Rail Group submitted to the Minnesota Department of Transportation, Bill Goins is the Chair of the Advisory Board for the corporation (p. 30) and he's also on the Board of Advisors for the Center for Transportation.
Goins touted the project at a business group meeting last month in Minneapolis, but the news source didn't disclose his connection to the corporation in its copy:
A rail line will be valuable when the city of Rochester – boosted by the multibillion-dollar Destination Medical Center initiative – sees the business and population growth it’s projecting in coming years, said Bill Goins, chair of the Minnesota Freight Advisory Committee, who attended the meeting.
“We recognize that [growth is] going to put a tremendous amount of pressure on Highway 52,” he told attendees. “There’re all kinds of options … but even from the movement of goods and commerce, we want to avoid gridlock on [Highway] 52.”
We're curious if he did disclose his service as NAHSRG's advisory group chair.
Whatever the case, the bill seems to build-in some conflicts of interest, and the CCARLS activists do well to demand transparency on who is paying the freight for working groups.
But at least the working group would be subject to ordinary regulatory capture, rather the high-speed, 21th Century version operating in the "public comment" period the corporation is operating now.
Background: Southeast Minnesota residences are concerned about a private passenger rail line that would not stop in their communities. They're also concerned that the private rail line could use eminent domain to condemn and acquire property that would then be developed to generate operating funds for the trains (check the business plan)--and that the train would disrupt existing businesses like farms.
CCARLS is meeting tonight, so we'll be looking out for reports in local papers about the gathering.
Photo: CCARLS has started a yard sign campaign against Zombie Ziprail, the project that won't die.
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