An oil company wants to set up its refinery in a town. Environmentalists are against this project, as it will pollute the nearby river. The initial ban on the project was suddenly removed and a government official approved the project. People believe that the government official formulated certain policies to favor the oil company in spite of knowing the possible hazards the oil refinery will create. Which type of bureaucratic inefficiency is exhibited in this scenario? ________is exhibited in this scenario.

Regulatory capture is exhibited in this scenario.

Extra: Regulatory capture occurs when a regulatory agency, which exists to act in the public's interest, instead advances the commercial or special concerns of interest groups that dominate the industry or sector it is charged with regulating. When regulatory capture takes place, the interests of firms or political groups are prioritized over the interests of the public, leading to a net loss for society as a whole. One of the outcomes can be the implementation of policies that benefit certain private parties over the public good.

In the scenario described, if environmentalists believe that a government official formulated policies to favor an oil company, it suggests that the company may have exerted undue influence over the regulatory body or official in question. This could be through lobbying, bribery, the promise of future employment for the official, or other means. As a result, the regulatory body does not fulfill its duty to protect the public interest, such as ensuring a clean environment or protecting public health. This failure to regulate effectively goes against the reasons for having the regulation in the first place, which is to prevent harm to the environment and to people who rely on the natural resources in question.