Politically contentious issues in regulation

How much politics goes into the development, implementation, evaluation, and reform of regulation? Over the last few weeks, I have begun writing a short series of blog posts that map how scholars of public administration in general and regulatory scholars in particular have theorized the politics of regulation.

In this final blog post in this series, I will look at four politically contentious issues in regulation.

Or actually, I will look at five contentious issues…

Why to regulate, what and whom to regulate, and how to regulate quickly become politically contentious questions.

There is no shortage of politically laden pro-regulation debates and there is no shortage of politically laden pro-deregulation debates [see among others: 1, 2, 3]. Since the 1990s, these debates have grown in volume and reach—from being niche discussions amongst regulatory and socio-legal scholars to being mainstream debates.

Many of these debates, however, are variations on the four perspectives discussed in the previous blog post.

Broadly speaking, proponents of regulation often follow public interest arguments; proponents of deregulation often follow public choice and private interest arguments; cynics and realists often follow institutional arguments. One general conclusion coming out of these debates is worth mentioning, however: regulatory and socio-legal scholars broadly agree that since the 1990s we have not witnessed processes of ‘pure’ regulation or ‘pure’ deregulation but often combinations of both—sometimes referred to as ‘reregulation’ [3].

One of the most illustrative studies on this theme is David Vogel’s book Freer Markets, More Rules. It describes how, in a variety of countries, liberalisation (and deregulation) has resulted in more heavily regulated markets than before processes of liberalisation (and deregulation).

In what follows, rather than repeating the earlier discussed perspectives in this section, it seems of more interest to touch on a few topics in regulatory scholarship that quickly become politically contentious—irrespective of them being discussed in pro-regulation or pro-deregulation literature.

Deterring people into desired behaviour?

Debates about regulation and deregulation are often influenced by how people (policymakers and others) understand compliance with regulation. Two broad schools of thought stand out.

On the one hand is the idea that regulatory governance can best follow a deterrence-based strategy [4]. This strategy that aims at deterring non-compliance prior to the law being broken [5] or aims at sanctioning non-compliance after the law has been broken [6]. The starting point of the strategy is that the consequences of non-compliance have to be feared by the targets of regulation [e.g. 7], and that the higher the chance of getting caught breaking the law and/or the higher the sanctions if the law is broken, the less willing people are to break it [8].

The strategy has, however, received considerable criticism. Critics state that it is ineffective and expensive, brings about problems with enforcement, aim too much at end of pipe solutions, and may be subject to legalism when the proliferation of rules leads to over-regulation which may strangle competition and entrepreneurship in the market [9].

On the other hand, there is the idea that many people comply with regulations because they feel a moral duty to obey [10]. Building on these insights, regulators use compliance-oriented strategies that encourage those features that bring about spontaneous obedience and weakening those features that bring about non-compliance, for instance rewarding desired behaviour with positive incentives such as grants or subsidies [11].

Yet, solely relying on compliance-oriented regulation may come with its own shortcomings. For example, positive incentives work indirectly and might react too late; it is difficult to measure their actual effects on compliance; and public concern may arise as to why some harmful behaviour is nevertheless being accepted [12].

Regulatory scholarship now often suggests regulators to carefully mix different strategies. For example, combined insights about the strengths and weaknesses of deterrence-oriented and compliance-oriented regulation led to a ground-braking strategy: responsive regulation [13].

Responsive regulation builds on the notion that rejecting deterrence-oriented regulation is naïve, though, total commitment to it might lead to unnecessary employment of means. The relation between regulator and those subject to regulation, the regulator’s ability to choose between different sanctions and rewards is regarded the strength of this model [14].

Nudging people into desired behaviour?

Debates of regulation and deregulation are also strongly influenced by how people (policymakers and others) understand the broader behaviour of targets of regulation.

For long, regulatory governance, like many areas of policymaking and implementation, has been built on rational choice theory [15]—and often still does. A central aspect of this theory is that people are rational beings who have ‘stable, coherent and well-defined preferences rooted in self-interest and utility maximisation that are revealed through their choices’ [16, 141].

Insights from behavioural economics, cognitive sciences, and psychology have, however, pointed out that humans often deviate from this utility model [17].

Following these insights, since the early 2000s, governments around the world have begun to embrace a more realistic human behaviour model through behavioural insights informed regulatory interventions [18]. These seek to address people’s heuristics and biases, such as hyperbolic discounting and status quo bias [19].

Whether regulatory interventions building on these insights improve the effectiveness of regulatory governance is an area of much debate.

Organisations dedicated to testing behavioural insights informed regulatory interventions, such as the Behavioural Insights Team in the United Kingdom, are actively involved in tests and (randomised control) trials to understand whether a specific intervention has the desired outcomes. They often find that the regulatory interventions they have developed are effective in changing the behaviour of those they target.

When looking at the broader academic literature, however, the answer to the question ‘does the use of insights from the behavioural sciences result in desirable regulatory outcomes?’ is less clear-cut.

Academics find that interventions building on these insights sometimes have desirable effects, and sometimes do not. They stress that, currently, we lack robust evidence to make generic statements about the extent to which regulatory interventions informed by behavioural insights live up to their expectations. This is a careful way for academics to say that, despite a large amount of research, they do not know if this approach works across the board [20].

Still, the use of behavioural insights in regulatory governance is often low-cost, and if applied on a large scale, even small improvements at the individual level may matter a lot at the level of society.

Achieving desired behaviour through non-governmental parties and intermediaries?

A third issue that strongly affects (public policy) debates about regulation and deregulation is the question of who should do the regulating. For long, the almost univocal answer to that question was: government should be involved in the regulation of public policy objectives.

Specifically since the 1970s, questions have risen about whether government and its bureaucratic apparatus is the most effective, efficient, accountable, legitimate (etc.) party to develop, implement, assess, and reform regulation [21]. This questioning of whether government is in the best place to regulate has resulted in, at least, three broad suggestions.

First, let the targets of regulation regulate their own behaviour [22]. The assumption then is that targets of regulation will always have an information advantage over public regulators. May this be about what needs to be regulated (and enforced) and why; or about what the targets of regulation are willing to do to meet the expectations of the regulator [23].

To prevent that the targets of regulation are given too much freedom, the regulator could introduce some requirements as to how the targets should self-regulate—a model known as ‘enforced self-regulation’ [24].

Second, let the regulator share the responsibility of developing and implementing regulatory interventions with targets and beneficiaries—a model known as ‘co-regulation’ [25].

The assumption then is that better regulatory interventions will be developed if the knowledge of targets and beneficiaries is actively used; that targets and beneficiaries will feel more responsible for the outcome of the regulatory intervention because they are party responsible for it; and, that targets are more willing to comply with the intervention because they are involved in its design and implementation [26].

Third and final, let government outsource and contract out regulatory tasks to ‘regulatory intermediaries’ [27]. The assumption then is that by embracing the skills and expertise of these intermediaries the effectiveness and efficiency regulatory interventions can be improved, as well as the accountability of regulatory regimes as a whole.

Regulation of regulation itself?

A fourth issue that is increasingly affecting (public policy debates) about regulation and deregulation concerns the regulation of regulation itself.

For long, governments around the world have developed principles and guiding philosophies for the regulation of regulation—a form of meta-regulation. Their ambition is to ensure that regulatory agencies across government comply with a set of coherent and consistent criteria when proposing, developing, implementing, reviewing, and terminating regulation and regulatory interventions.

The United States has a long history in this regard. In the mid-1940s, for instance, it introduced the Administrative Procedure Act (APA), which was touted a “bill of rights for the hundreds of thousands of Americans whose affairs are controlled or regulated” when introduced [as quoted in 28, 45]. It requires regulatory agencies, among others, to keep the public informed of their organisation, procedures, and rules; to provide public participation in the rulemaking process; and, to establish and follow uniform (whole-of-government) standards for rulemaking and implementation.

On the other side of the Atlantic, the European Commission launched its Better Regulation Agenda (BRA) in the early 2000s. Akin to the APA, the BRA is a set of requirements and expectations for regulatory agencies at the EU level to follow. This to ensure that regulation is developed and implemented openly and transparently, builds on the best available evidence, is backed by stakeholders, and respects the principles of subsidiarity and proportionality [29].

In New Zealand, a philosophy of Regulatory Stewardship is currently driving regulatory reforms. In addition to the APA and BRA, this guiding philosophy also addresses the (base) qualifications, skills, and expertise of those working in regulatory functions [30]. Such guiding philosophies become all the more important with the ever-growing number of regulatory agencies that seem work ever-more remotely from and autonomous of their ‘parent’ ministries (see the debates on agencification [31]).

Conclusion

The last three blogposts have mapped, explored, and interrogated half a decade of (academic) debates on the politics of regulation.

As is the case with these kind of overview discussions, this series of blog posts is by no means meant as an exhaustive overview of all the literature on the politics of regulation. It has, however, provided a solid overview of (public policy) debates about what regulation can and cannot achieve, the most dominant (public policy) perspectives for and against regulation, and some of the most politically contentious questions about why to regulate, what and whom to regulate, and how to regulate.

References

1.            Derthick, M. and P. Quirck, The politics of deregulation. 1985, Washington, DC: The Brookings Institute.

2.            Prosser, T., The regulatory enterprise: Government, regulation and legitimacy. 2010, Oxford: Oxford University Press.

3.            Majone, G., Deregulation or re-regulation? Regulatory reform in Europe and the United States. 1990, London; New York: Pinter; St. Martin’s Press.

4.            Kagan, R.A., On regulatory inspectorates and police, in Enforcing regulation, K. Hawkins and J.M. Thomas, Editors. 1984, Kluwer-Nijhoff: Boston. p. 37–64.

5.            Reiss, A., Selecting Strategies of Social Control Over Organizational Life, in Enforcing regulation, K. Hawkins and J.M. Thomas, Editors. 1984, Kluwer-Nijhoff: Boston. p. 23-35.

6.            Hawkins, K., Environment and enforcement regulation and the social definition of pollution. Oxford socio-legal studies. 1984, Oxford: Oxford University Press.

7.            Ogus, A., Comparing regulatory systems: institutions, processes and legal forms in industrialized countries. Working Paper Series. Vol. 35. 2002, Manchester: Centre on Regulations and Competition.

8.            Coolsma, C. and M. Wiering, Handhaving in stukken beschouwingen over theorie en praktijk van de handhaving van recht. VSR-SISWO-reeks, nr. 4. 1999, Amsterdam: SISWO/Instituut voor Maatschappijwetenschappen.

9.            Bardach, E. and R.A. Kagan, Going by the book: the problem of regulatory unreasonableness. 1982, Philadelphia: Temple University Press.

10.          Tyler, T.R., Why people obey the law. 1990, New Haven: Yale University Press.

11.          Parker, C., Reinventing Regulation Within the Corporation: Compliance-Oriented Regulatory Innovation. Administration & Society, 2000. 32(5): p. 529-565.

12.          Baldwin, R., M. Cave, and M. Lodge, Understanding Regulation: Theory, Strategy and Practice – second edition. 2012, Oxford: Oxford University Press.

13.          Ayres, I. and J. Braithwaite, Responsive Regulation. Transcending the Deregulation Debate. 1992, New York: Oxford University Press.

14.          Braithwaite, J., The Essence of Responsive Regulation. University of British Columbia law review., 2011. 44(3): p. 475-520.

15.          Bernstein, P., Against the gods: The remarkable story of risk. 1996, New York: John Wiley & Sons.

16.          McMahon, J., Behavioral economics as neoliberalism: Producing and governing homo economicus. Contemporary Political Theory, 2015. 14(2): p. 137-158.

17.          Kahneman, D., Thinking Fast and Slow. 2011, New York: Farrar, Straus and Giroux.

18.          van der Heijden, J., Behavioural insights and regulatory practice: A review of the international academic literature. State of the Art in Regulatory Governance Research Papers. 2019, Wellington: Victoria University of Wellington/Government Regulatory Practice Initiative (G-REG).

19.          OECD, Behavioural Insights and Public Policy: Lessons from around the world. 2017, Paris: OECD.

20.          Baldwin, R., From Regulation to Behaviour Change: Giving Nudge the Third Degree. Modern Law Review, 2014. 77(6): p. 831-857.

21.          Osborne, D. and T. Gaebler, Reinventing government: how the entrepreneurial spirit is transforming the public sector. 1992, Reading: Addison-Wesley Publishers.

22.          Gunningham, N. and J. Rees, Industry Self-Regulation: An Institutional Perspective. Law & Policy, 1997. 19(4): p. 363.

23.          Short, J. and M.W. Toffel, Making Self-Regulation More Than Merely Symbolic: The Critical Role of the Legal Environment. Administrative Science Quarterly, 2010. 55(2): p. 361-396.

24.          Hutter, B., Is Enforced Self-regulation a Form of Risk Taking?: The Case of Railway Health and Safety. International Journal of the Sociology of Law, 2001. 29(4): p. 379-400.

25.          Levi-Faur, D., Regulation and regulatory governance, in Handbook on the Politics of Regulation D. Levi-Faur, Editor. 2011, Edward Elgar: Cheltenham. p. 3-21.

26.          Van der Heijden, J., Governance for Urban Sustainability and Resilience: Responding to Climate Change and the Relevance of the Built Environment. 2014, Cheltenham: Edward Elgar.

27.          Abbott, K.W., D. Levi-Faur, and D. Snidal, Introducing Regulatory Intermediaries. Annals of the American Academy of Political and Social Science, 2017. 670(1): p. 6-13.

28.          Rosenbloom, D.H. and R. O’Leary, Public Administration and Law. 1997, New York: Marcel Dekker.

29.          Radaelli, C. and A. Meuwese, Better Regulation in Europe: Between public management and regulatory reform. Public Administration, 2009. 87(3): p. 639-654.

30.          Van der Heijden, J., Regulatory stewardship: The challenge of joining a virtue and a mechanism. Policy Quarterly, 2021. 17: p. 1.

31.          Christensen, T. and P. Laegreid, eds. Autonomy and Regulation: Coping with Agencies in the Modern State. 2006, Edward Elgar: Cheltenham.