1 / 21

The Regulatory Challenge

This lecture provides an overview of the challenges faced by regulators and the various approaches to regulation. Topics include the historical evolution of the regulatory state, the definition of regulation, arguments for and against regulation, and lessons learned from past experiences.

sbroussard
Download Presentation

The Regulatory Challenge

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. The Regulatory Challenge Wyn Grant University of Warwick

  2. The big picture • In this lecture I shall be summarising a vast political science literature on regulation • We will discuss PSD related issues in the workshops • My underlying assumption is that regulation is a key task that serves the public interest – but presents many challenges for regulators

  3. It all started at Putney in 1647

  4. An historical ideal type • Limited/night watchman/Westphalian state • ‘The chief end of government is to preserve persons as well as estates’ – Major William Rainsborough • Tasks are defence of territory, law and order; mobilisation of finance • 1790 – debt, defence and administration – 82% of all spending

  5. Keynesian/command state • 1890 traditional functions still account for 65% of expenditure, 20% social (mainly education) • Before First World War government accounts for 15% of GDP • First steps towards new type of state taken with People’s Budget of 1900 (Lloyd George)

  6. Keynesian Welfare State • Promise of full employment • System of social insurance • National Health Service • Public housing • Public expenditure grows faster than GDP – a specific political objective • Faces a crisis as rate of growth falls

  7. Concept of regulatory state • Term originates in work of Chalmers Johnson on Japan (1982) as contrast to developmental state • Historically US was best example, regulation preferred mechanism for dealing with market failure • A regulatory state as one that attaches more importance to regulation than other forms of policy making

  8. What is regulation? • Not easy to define but involves application of predetermined rules to actions of firms or individuals for public benefit (in principle) • Rule-based behaviour, controlling or permitting behaviour • Use of institutions of scrutiny and enforcement • Technocratic or depoliticised, semi-detached from everyday political pressures

  9. Moran’s interpretation • (Originally) saw it as ideal typical Weberian progression • Command state involved hierarchical, classical bureaucracy • ‘Club government’ – tacit knowledge of insiders, self regulation (City) • World of command infantilised us all, subjects rather than citizens

  10. Regulatory state emerges • Old world undermined by scandal, weakened systems of self regulation, e.g., financial markets (self-regulation survives in sport) • New world of self-steering networks, governance rather than government • Regulatory state is a low trust state and a risk state

  11. Many drivers of regulatory state • Majone: EU as a regulatory state, comparative advantage is in regulation, as has few fiscal instruments • Modernity multiplies risks, there is a heightened sense of risk – a cultural construction but important • Low public expenditure way of meeting public demands, costs met by regulated • Privatisation leading to utility regulation

  12. Scandals picked up by media • New scandals highlighted by media lead to demands for government action • FSA asked to regulate hamper clubs, bus services outside London re-regulated • But regulators may clash: Ofcom resisted Food Standards demands on obesity because of responsibility for high quality tv programmes – ‘two regulators approaching the same public policy challenge from the perspective of their very different remits’ – head of Ofcom

  13. Arguments for regulation • Reflects growing complexity of society, need for task specific regulators • They can bring expert knowledge to responsibilities • Decisions based on rigorous scrutiny of evidence rather than on party political assumptions

  14. But their task is difficult • Single issue pressure groups, reflecting more fragmented society • Accountability of such groups to no one, lack transparency • Assertions not backed by evidence publicised by the media, especially the case in food chain issues

  15. Arguments against regulation • Regulatory capture argument. Largely invalid. Based on experience in US resulting from ‘iron triangles’ of Congressional committees, regulatory agencies and regulated • Asymmetries of information between regulator and regulated. Can be a problem, but better dealt with by specialised agencies rather than generalist civil servants

  16. Arguments against regulation (2) • Replacing decision-making by insiders by decision-making by experts • Technocratic undermining of democracy • Moran repudiates benign view, empowering civil society, enhancing transparency, now sees it as ‘more threatening and interventionist’

  17. What we have learnt (1) • Need to choose right policy instruments • Over reliance in past on command and control mechanisms, high transaction costs, often ineffective, leads to bargaining outcomes (but they have a role) • Cooperation agreements, but above all taxes and trading mechanisms. Carbon tax arguably best approach to global warming

  18. What we have learnt (2) • Need to review structure and organisation and agencies regularly • Hampton Review in UK commissioned by Treasury, looked at 63 national regulators • Reduction in number of agencies • Better Regulation Executive

  19. The regulatory challenge • Regulators have to work within a statutory framework • The consequences of making a mistake is serious, particularly where public safety/environmental protection is involved • But they also have to respond to changing demands in society

  20. Regulatory innovation • Almost a contradiction, but important if regulators are to retain trust of politicians and stakeholders • Exogenous pressures picked up by internal change agents, desire to do a better job • Value of policy learning from regulators outside UK, also from research

  21. A need for balance • Who regulates the regulators? The courts and ministers retain ultimate control • Change in architecture of public policy formation demands care about which decisions should be made by regulators • What sort of society we should have and what is unlawful is a political decision

More Related