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Applied and bridge studies study record
Environment, climate & resourcesThe Fiscal Capture Theorem: Why Governments Cannot Reform What They Depend On
STATUS · Manuscript in progressSSRN · Not yet posted
MECHANISM
Identify the incentive structure and the condition that would falsify the claim.
RULE CHANGE
Read the intervention only after the paper shows how the current payoff space fails to support system welfare.
READER USE
Use the summary to see where private gain creates system exposure, then check the study record.
Contribution — what this adds to the conversation
Proves a new theorem in public economics that bridges SAPM, regulatory capture, and rentier state literatures. Provides measurable FDI index and falsification conditions. Offers reform architecture (Norway GPFG model) with empirical success/failure cases.
WHAT'S NEW · Formalizes fiscal capture as a structural consequence of W-Independence, not a political failure. Derives cutoff condition φ* from first principles. Distinguishes fiscal capture from classical capture (no transfer needed) and rentier state theory (mechanism is regulator's budget, not accountability).
The Fiscal Capture Theorem proves that when a government depends on revenue from a harmful industry, it cannot credibly commit to reform. Derived from the System Asset Pricing Model, the theorem shows that above a critical fiscal dependency threshold, welfare-improving reform is structurally impossible. Confirmed across fossil fuels, tobacco, gambling, alcohol, and opioids, the theorem explains $7 trillion in global fossil fuel subsidies and the persistence of reform failures. The only proven solution is constitutional-level revenue decoupling, exemplified by Norway's Government Pension Fund Global.