Many of the agendas associated with economic reform have been big successes. Deregulation of things that shouldn’t have been regulated, like trade, shopping hours, airlines, you name it has worked well. Financial regulation . . . ehem not so well. Indeed, in terms of the wellbeing of your average Joe, it wouldn’t be that surprising if the depredations of finance had managed not just to offset but to outweigh the benefits of all the other reform put together, at least for a lot of those on and below average earnings and at least in the US.
There’s been one area of reform that hasn’t so much been a failure as more or less a non-starter. Regulation reform. One reason is that it gets down to minutiae. I recall the BCA put out a document on which states were doing better and which worse on regulation in the term of the last Parliament. It was a ‘scorecard’. Who wouldn’t like a scorecard? But they really had no idea. How do you decide the quality of one state’s 30,000 pages of regulation compared to anothers’? Well you don’t really, but you wave your arms around a lot and . . . well you issue your scorecard.
On searching for it here’s (pdf) it is in all it’s glory. A scorecard from a few years ago. How did they score the scorecard? Well against benchmarks silly! Benchmarks – why didn’t you think of that?
Principles of regulation making:
a comprehensive framework for regulation
making that includes: the need to consider
alternatives to regulation; clear policy objectives;
cost–bene? t analysis; consultation with business;
effective and proportional responses; and review.
+ Accountability: mechanisms to ensure that the
principles of regulation making are implemented
properly and that regulators are held to account
for their performance.
+ Transparency: mechanisms to ensure that
decisions are conducted in a transparent manner
and those potentially affected can provide input
into the process.
+ Review: mechanisms so that regulations are
subject to review to ensure they remain relevant
and ef?cient over time.
By evaluating the performance of states to date
against these four clear benchmarks, the BCA
can highlight to business, government and other
interested parties where jurisdictions are doing
well or why they are falling short in ensuring
commitments to reform red tape making are
undertaken and the burden of red tape is reduced.
Does that help? Do you really think these principles will enable you to be confident that you can rank different performances, and tradeoff a good performance in one area against a lacklustre one elsewhere? How does one hold to account the regulators at ASIC, or the RBA or anywhere else when you can’t even be confident you know what’s causing what or whether some other human(s) in their position would have done a better or worse job?
There’s a more recent scorecard here (pdf). In that scorecard the Commonwealth is said to have gone backwards. On a quick reading that’s because the Office of Best Practice Regulation is less independent than it was under the PC. In a formal sense that’s true. But in fact the OBPR, at least under Lindsay Tanner was instructed to make public any non-compliance with regulation making guidelines at the time of regulation making, a much stronger sanction than the sanction which was to publish it in the Annual Report. So there’s form and there’s substance. Also it’s hard to know if the distance from day to day government one gets from independence is worth it, or whether having someone closer to the action in a central agency is better. No-one really knows, though I do think it’s a pity that the PC didn’t make more of the OBPR’s independence when it had it.
Why am I writing all this? Well as notes for the record in case I want to come back to them, and because I was reminded of it by this paper
The Use of International Standards in Technical Regulation by Barbara Fliess, Frédéric Gonzales, Jeonghoi Kim and Raymond Schonfeld
To what extent are governments drawing on relevant international standards in their technical regulations, as mandated by the WTO TBT Agreement? A number of sources of data exist, including electronic databases maintained by governments, but they cannot be used to obtain systematic, international perspective, because there is no harmonised international format and they are incomplete. This study develops an analytical frame for collecting and presenting data on the use of standards in regulation in any sector, as a basis for effective monitoring of the actual extent of use of international standards in regulation and for empirical analysis of the trade effects. This template is then applied to collect and report for five OECD countries detailed factual information on technical regulations, their objectives and standards use in three sectors – electrical household appliances, equipment for natural gas and telephony. The research finds that core government policies confirm the receptiveness of policy and regulation to the use of international standards. It illustrates the difficulty of identifying, for a given sector, which standards are used, for which regulatory objectives, and with which links – direct or indirect – to standards used internationally. The data collected in the harmonised format of the template show how transparency of data on standards use could be improved. Improved transparency can facilitate efforts to improve harmonisation where this can help to remove barriers to trade. Explicit identification of regulatory objectives can ensure that attempts to promote wider harmonisation take account of those objectives. Also, the range of non-national standards actually used as a basis for technical regulation is greater than sometimes acknowledged, and wider knowledge of their availability and use could be helpful to regulators. Another benefit of transparency is that factual presentations of the use of standards in technical regulations provide a source of rich and accurate data for use in empirical work on how regulatory use of standards influences international trade.
In other words, these authors had the same trouble the BCA had. One can’t get to the bottom of these things in the kind of way that gets you a coherent paper either in academia or in industry advocacy without making all sorts of simplifying assumptions. And that suggests that top down driven processes can’t generate better regulation, because ‘the top’ gets lost in the detail. That’s one reason why I’ve argued that one needs to try to think about the regulatory system in the way that Toyota thinks about making cars, by trying to build a system which motivates and empowers those on the ground to do a good job. Alas, that’s easier said than done!
Postscript: I just came upon this diagram ranking the flexibility of all product market regulation across all OECD countries – a time series no less!! And quoted in all seriousness by the New Zealand Treasury. I wonder whether the assumptions necessary to generate the series leave anything useful in their wake.