The potential of behavioural economics for regulation (OECD)

At its November session, the OECD Regulatory Policy Committee (RPC) inaugurated a new workstream devoted to tapping the insights of behavioural economics (BE) for better regulatory design. As the topic was new for some delegates, the floor was given to two top experts in the field, Alberto Alemanno and Peter Lunn, for a general presentation of the current situation regarding BE.

Alberto has published "Nudging Legally - On the Checks and Balances of Behavioural Regulation" on SSRN.

Peter Lunn's paper commissioned by OECD, which includes a full bibliography, will shortly be published. It offers an international review of the initial applications of behavioural economics to regulation using some 60 cases, which shows that behavioural findings are having an impact on the content of and the method for designing regulation.

Further work of the OECD on this topic is likely to focus on international comparisons of economically significant cases and best practices of behaviourally-informed regulation.

The new concepts have been layed out in "Libertarian Paternalism" by R. Thaler and Cass Sunstein.

For an update on other topics discussed at the RPC recent session, experts should frequently visit the well-devised section on regulatory policy "Latest Documents" of the OECD website.

Why regulatory reform matters to the MENA region

In the margin of the November session of the regulatory policy committee (RPC), OECD published Regulatory Reform in the Middle East and North Africa: Implementing Regulatory Policy Principles to Foster Inclusive Growth which is the Organisation's first progress report on the implementation of OECD regulatory policy principles in the MENA region. Covering Bahrain, Egypt, Jordan, Lebanon, Mauritania, Morocco, the Palestinian Authority, and Tunisia, the report provides recommendations based on the 2009 Regional Charter for Regulatory Quality and the 2012 OECD Policy Recommendation of the Council on Regulatory Policy and Governance.

The review reveals that an explicit regulatory policy in the MENA region is still in its infancy. The countries involved do not have an explicit regulatory policy. Systematic regulatory systems, processes and tools, such as Regulatory Impact Assessments, are also new to most governments in the region. The review concludes that further efforts are necessary to institutionalise regulatory policy and governance, for instance by implementing regular performance assessments of regulations.Improving the clarity and efficiency of regulations will benefit both citizens and enterprises and mark a crucial element in the transition process of MENA countries.

See also OECD Insights blog for a post analysing the new publication, by Moritz Ader and Miriam Allam.

Two BR events on 5 December

1/ - Paris: OECD/French Senate workshop on the role of parliaments in better regulation (by invitation from Registration).

"A key task of Parliament is to vote on the law. It is also necessary that the law is clear and enforceable. However, the increasing complexity of contemporary societies has led to a proliferation of bad quality and complex normative texts. To stop this tendency is a government objective taking various routes : codification , simplification laws , legistics, evaluation of the quality and the normativity of the law, etc. In the context of globalization , the challenge is not just legislative drafting and legal quality, public authorities must also ensure effective implementation of the effects of laws passed , and preserve the economic competitiveness and attractiveness of the country.

There are international instruments to promote these goals, especially at the OECD, which has set up a committee on regulatory policy and adopted in 2012 a Recommendation of the Council on Regulatory Policy and Governance . Similarly, parliaments, sharing the objectives of good governance and the quality of legislation, are becoming more attentive to the way laws are implemented and achieve their results, as shown by the development of boards or units providing assessment of bills and laws and the increasing use of assessment tools like CBA and RIA.

This symposium , organized by the Senate Committee for the control of implementation of laws, in partnership with OECD, aims to better identify the role that Parliaments can play in assessing the quality of legislation . Based on testimonies and an exchange of best practices between French institutions and foreign parliamentary assemblies , it will discuss the role of parliaments in the processes and the tools they use for this purpose" (from the organisers' leaflet.)

2/ - The Hague: International Seminar on "Executive discretion and regulatory decision making – Issues and challenges in making regulation more effective" organised by the NL Academy for Legislation (by invitation). 

"The question of the appropriate amount of discretion that the executive branch should wield, and within it in particular regulatory bodies, is central to the understanding of how regulation and enforcement work, and to efforts to make them both more effective and efficient.

Proponents of regulatory discretion consider that it is the only way to escape the conundrum of writing exceedingly specific rules that end up being unwieldy and rapidly obsolete – and lend themselves to “gaming the system” by rogue operators. Critics point towards the risk of abuse, be it regulatory capture or corruption, abuse of power, and breakdown of the rule of law. One of the questions may be if it is at all possible to have enforcement of any type of rule without some sort of discretion." For more information, contact Florentin Blanc.

New RIA handbook from Israel

Our colleagues from Israel have just published online a particularly complete RIA handbook which will enrich the literature on this key tool in the search for "optimal regulation" (the term used in the handbook). The IL approach is quite distinctive and merits consideration, as it breakdowns the RIA process into five "stages" covering the whole regulatory cycle, integrating up-to-date international best practice:

- describing the status quo and defining policy goals;

- risk management, to determine the most efficient regulatory instrument for each "risk component" in the policy under consideration;

- assessing impacts including feedback from consultation procedures and comparing advantages and disadvantages of various projected regulations (options);

- anticipating implementation of the chosen solution to achieve success of the policy (including enforcement and inspection issues);

- public reporting to achieve transparency and accountability in regulatory design.

Other RIA methodologies and resources (from other countries) can be found on the OECD RIA pages.

New RIA resources (APEC/Mexico)

The Mexican Federal Regulatory Commission ( COFEMER ) and Asia-Pacific Economic Cooperation Forum (APEC ) held in Mexico City, on 7 and 8 November, their third Workshop on "Final Guidance and Capacity Development Programme for Regulatory Impact Assessment " (available from COFEMER.)

The purpose of the workshop was to share experiences and best practices in regulatory reform, contributing to improving the competitiveness and well-being of the economies of the Asia -Pacific region. The workshop brought together civil servants from various countries in the Asia - Pacific region, including Chile, South Korea, Philippines, Indonesia, Malaysia, Mexico, Peru, Russia, Thailand and Vietnam, and international experts. The workshop approved the final version of a guide for assessing the impact of regulation, to which is appended a volume of case studies, and a joint training programme to enable knowledge transfer to regulators and government officials in the participating economies.

This was the third and final workshop of the APEC - Mexico Project "Development and implementation of methods to improve the quality of regulation and Regulatory Impact Assessments," aimed at increasing the openness of markets, transparency and economic growth.

Icelandic independent regulatory council

An announcement from our colleague Pall Thórhallsson: This week, the Icelandic Government tabled a bill in Parliament proposing an independent regulatory council. The Council will review draft legislative bills and proposals for secondary laws which have a significant impact on businesses and competition. The Council will in particular scrutinise the impact assessments accompanying regulatory proposals. The opinions of the Council will be published on its website and attached to Government bills. Parliamentary Committees are also invited to consult (i.e. they are not obliged to do so) with the Council on members bills and on amendments to Government proposals. The Council can also at its own initiative issue opinions on Parliamentary documents in its field. Furthermore, the Council will issue statistics on the evolution of regulatory burdens of businesses. The bill makes clear that not only administrative burdens should be monitored, but also compliance burdens in general. Tax proposals and proposals based on minimum requirements due to the agreement on the European Economic Area (i.e. the incorporation of EU-law) are excluded from the mandatory scrutiny of the Council. The bill was drafted following a Seminar held in Reykjavik on 2-3 September 2013 in which Nick Malyshev from the OECD, Michael Gibbons from the UK Regulatory Policy Committee and Peter Bex from SIRA-Consulting took part. For more, see English translation of the bill and to the Government´s action plan in this field. 

See also recent post on the Norwegian regulatory council which cites the other European oversight authorities (GE, NL, UK.)

Vers un code de l'administration (France)

Le 30 octobre, l'Assemblée nationale a adopté le projet de loi habilitant le gouvernement à simplifier les relations entre l'administration et les citoyens, texte qui devrait entrer en vigueur prochainement. Le contenu de ce projet de loi avait été résumé en conseil des ministres du 2 juin et a bénéficié de la procédure accélérée pour son adoption:

"Il autorise le Gouvernement à adopter par ordonnance un code des relations entre l'administration et le public. Ce code regroupera l'ensemble des règles de la procédure administrative qui sont aujourd'hui d'accès difficile parce qu'elles sont jurisprudentielles ou dispersées entre divers textes. En outre, le Gouvernement sera autorisé à modifier les règles actuelles, dans le sens de la simplification et de l'harmonisation. Ce nouveau code sera donc à la fois un facteur de transparence et un instrument permettant de simplifier les démarches.

Le projet de loi permet également de mettre en œuvre à brève échéance trois mesures de simplification urgentes. Il crée un droit de saisir l'administration par courrier électronique. Il facilite les délibérés à distance des organismes collégiaux. Enfin, il expérimente la communication d'avis donnés par un organisme ou une autorité au cours de l'instruction d'une demande pour permettre au demandeur d'améliorer son projet et de prévenir l'intervention d'une décision défavorable. Ces mesures seront prises par ordonnance." (...)

Une analyse critique du texte est donnée dans la Gazette des Communes par un juriste. 

Voir aussi billets précédents sur l'annonce par le président de la république en mai 2013 et un résumé le contenu du projet de loi en juillet.

New textbook on RIA at EU level

Friend-of-the-network and top-expert Erick Akse publishes today a new must-have book on RIA: "Influencing the Preparation of EU Legislation: a practical guide to working with impact assessments". All RIA practioners in Europe and elsewhere should buy a copy as this book was written with them in mind. Though primarily based on Erick's experience drafting some 30 RIAs for the EC, its detailed analysis of what is perhaps the most sophisticated RIA scheme in operation will be useful for all those facing the challenges of quality impact assessments. As stated in Mr Stoiber's preface, it also offers a starting point for further improvement of the system, some lessons being quite transposable to national experience.

Erik writes about his book:

"In my book, I describe in detail how the European Commission prepares its legislative and policy proposals through its system of Impact Assessment. The description covers, amongst others, the content requirements Impact Assessments need to live up to and the average 18-month procedure they go through from start to finish. I also explain how stakeholders can step into the Impact Assessment process and promote their interests effectively...  The target group is in principle everyone working with European legislation and policy."

FR business organisation suggests new targets for red tape

How does French business view the UK "Cutting EU red tape" report? The president of MEDEF (employers' confederation) was recently commenting on the British report drafted by an independent business panel. This was an opportunity for this text to be made known in France.

President Gattaz recalled that simplification was one of the main commitments of his organisation's programme of work and said that what was required was a new mindset in the legislative and regulatory process. He was very interested in the methodology developed by the British to drive the internal process of simplification ("one in, two out"); simplification, to be successful, must be sought according to a rigorous methodology. To do this, MEDEF would propose to the French government and parliamentary concrete objectives: 

- reduce the stock of regulation by 5% a year, especially in the labor law, taxation, environment, urban planning, 

- improve the quality of new legislation, avoid frequent changes. 

For more, see links to the report and summary and recent critical comment, in previous posts. Source of this post: Enjeux.

UK report on EU red tape "not well-researched"

An interesting reaction to the recent business panel report (see previous post) of the of the was published today (4 Nov.) by A. Ackroyd, a labour and employment law expert on Lexology:

(excerpt) "...you might expect the report to include well-evidenced conclusions of how silly Brussels-driven bent-banana regulations are putting businesses to disproportionate expense, whilst failing to meet their intended objectives. Unfortunately, if you were expecting this, you will be disappointed (though if you have read any of the other rationales prepared by the Government over the last three years for cutting employment red tape, probably not surprised). 

The Foreword to the report proudly announces that its conclusions are based on “input from hundreds of firms, individuals and business associations across Europe”. However, by the Executive Summary (a mere three pages later) the extent of the report’s sources is drastically reduced to “some 90 UK businesses and business organisations, and over 20 business organisations across Europe” (my guess is 21). 

Not only is the extent of its research questionable, but the report’s eight recommendations to reduce employment regulations also appear to be no more than wish-lists from anonymous sources. Typical of this is the recommendation that small, low risk businesses should not be required to keep written health and safety risk assessments. This recommendation is based on a quotation attributed to “a small business organisation” (your local corner shop, perhaps) suggesting that “Removing the requirement to write down risk assessments could save businesses across Europe 2.7 billion euros”. (end of quote). Well worth reading the full article.

Untapped potential of Smart Regulation for SMEs

According to a press release, from the Lithuanian (rotating) presidency of the EU organized on 29 October a panel discussion on Smart Regulation for SMEs, attended by Brussels based European business organizations, representatives of companies, EU institutions and diplomats. The event focused on impact of regulation to medium sized enterprises in Europe and possible ways to reduce regulatory burden. 

In his opening remarks Deputy Permanent Representative of Lithuania to the EU ambassador Arunas Vinciunas noted that as a rotating Presidency Lithuania has placed special attention on smart regulation and SMEs in its Presidency Programme. "Smart regulation for SMEs is an important priority for the European Union as efficient and fit for purpose legislation in that area is a prerequisite for economic growth and for strengthening the competitiveness of Europe. Regulation has a direct impact on businesses, on performance of the companies. Our task during Lithuania's presidency - to make at least a small step forward to make life easier for the creative and hard-working business people," said ambassador Vinciunas.

According to him Smart Regulation should not sound as just a political slogan. Smart Regulation contains a number of important instruments to be fully employed and still has undisclosed potential to make EU and national legislation less burdensome for enterprises and effective at the same time.

Red tape cutting in Ethiopia

According to Addis Fortune, an online paper, the Ethiopian government is seeking to reduce the number of licenses and speed up official response times in an effort to improve the business environment. The method to achieve this seems orthodox: the ministry of trade signs "cooperation agreements" with "professional competence certificate issuing government offices" to enlist their support in achieving the red tape reduction objectives. This method seems to fall short, however, of true liberalisation that would really stimulate private initiative.