Elite capture

Elite capture is a form of corruption whereby public resources are biased for the benefit of a few individuals of superior social status in detriment to the welfare of the larger population. 

• Elites are those who enjoy privileged status and exercise decisive control over society. Three-fold classification of elites are (a) knowledge elites, (b) entrepreneurial elites and (c) political elites. 
• Elites are groups of individuals with self-ratifying factors such as social class, asset ownership, religious affiliations, political power, etc have decision-making power in processes of public concern and uses public funds intended to be invested in services that benefit the larger population, to fund projects that would only benefit them. 
• Elite capture is related to information asymmetry, inefficient regulation or inefficient allocation of resources causing biased distribution of a public goods or a services, wherein certain segments of the population experience reduced access to these public goods. As long as there is elite capture, the welfare impact will not be Pareto Optimal* or equitable.*Pareto optimality is simply a statement of impossibility of improving one variable without harming other variables.
• When people have preferences about what other people do, the goal of Pareto efficiency can come into conflict with the goal of individual liberty.
• By yielding power to smaller units, money should be more efficiently distributed, but local governments are more vulnerable to pressure groups. Local governments are even more vulnerable to capture by local elites than national governments.
• Community-based development has inadequate understanding of power relationships at the local level, which leaves room for elite capture.
• An elite derives its status from its relationship to property, whether physical or human capital. While stable property rights are necessary for everyday business, unstable property rights may have a positive impact on economic development. Institutional changes have a positive impact on economic development when a country’s elite can manage them. 
• Counter-elite approach need not necessarily be effective in challenging elite domination, but the co-opt-elite approach risks legitimizing the authority of the elites and worsening poverty by implementing anti-poor policies. The success of dealing with elite capture lies in the flexible use of the counter-elite and co-opt-elite approaches together with the need to secure alternative livelihoods and to achieve empowerment with the poor.
• The role of elites in economic development have a disproportionate impact on development outcomes. While a country's endowments constitute the deep determinates of growth, the trajectory they follow is shaped by the actions of elites.
• Poverty is a problem for the rich in the sense that it generates negative externalities that they would like to reduce, and that the elite believe that there are effective remedies. While reducing poverty is a national priority, elites do not see it as their responsibility to do something about it. Elites feel that through education, poor will be able to take advantage of opportunities and resources and is a solution because everyone can supposedly get richer without the need for redistribution. Elites are failing to create a consciousness that makes them react more responsibly in supporting pro-poor policies.
• Evolution of welfare states inform us that elites’ prioritization of poverty reduction is driven by the extent to which elites and the poor are interdependent, such that the presence of the poor has a positive or negative impact on elite welfare. 

Believers in liberal freedom should worry whether they can prevail
against their own forms of institutional entropy:
elite capture, corruption, and inequality - Michael Ignatieff