New textbook on regulatory policy

Earlier this month, OCDE published a new reference book for members of our community: the first edition of the OECD Regulatory Policy Outlook 2015. This magnum opus summarizes 10 years of experience in designing and applying better rules and regulations to achieve economic and societal policy objectives. A press release summarizes the approach and the main conclusions, but experts will need to download the full material, which includes, to illustrate and give practical impact to each dimension (RIA, simplification, regulatory costs, etc), best national practices.

(From the press release): "The report finds that 33 of the 34 OECD countries have adopted an explicit regulatory policy and require regulatory impact assessments and public consultation for all new regulations, while 29 have a designated minister to promote regulatory reform.

However, a third of OECD countries have no policy at all on regulatory compliance and enforcement, and two-thirds have no system for evaluating laws once they are implemented. This creates unnecessary costs for businesses and society, the report says.

Internationally, co-operation in law-making is essential for creating global rules and standards, addressing trade frictions and environmental risks, and reducing the risk of regulatory failures such as the 2008 financial crisis or the recent VW emission tests scandal. Yet only a third of OECD countries have a clear policy for international regulatory co‑operation."

Impressive new resources for regulatory reformers

Below is a communication from top expert and inventor of the Regulatory Guillotine, Scott Jacobs, Managing Director of Jacobs, Cordova & Associates (Washington, DC). Your blogger is proud of his affiliation as Senior Associate with this reputed consultancy. 

(quote)

Dear Colleagues:

We are pleased to announce that our new website on regulatory reform is now live at www.regulatoryreform.com.

I would like to point you to two new resources for regulatory reformers around the world:

A new international Forum on all aspects of regulatory reform from RIA to retrospective review to economic growth. The Forum is at http://forum.regulatoryreform.com/. You will need to register before you post. You can start new threads or comment on existing threads. The Forum includes topics where you can post events such as conferences, and also announcements for jobs and CVs by those looking for work. 

A RIA Resources page at http://regulatoryreform.com/ria-community/. This page contains hundreds of RIA-related documents from dozens of countries that have adopted RIA. We are actively expanding this page, so please send any new or missing documents to janda@regulatoryreform.com. We will also announce RIA news, so send any new initiatives or reports to us for inclusion. 

We hope you find these resources useful in your work. 

Best wishes, 

Scott

(end quote)

How to design market-friendly regulation (Nobel)

It's good news for all smart regulators when the Nobel prize for economy is given to an expert who has devoted part of his research to the negative impact of regulation on economic activity, chiefly by regulatory interference with markets, and offering solutions.

An article in last week's Economist (18 October) examines Mr Tirole's contribution under the title "It's complicated" (one of the laureate's favorite phrases). "Making sure companies compete fairly is a tricky business. The firms being regulated know far more about their business than those doing the regulating; bureaucrats can easily end up being too heavy-handed or too lax. On October 13th Jean Tirole, a French economist at the Toulouse School of Economics, was awarded the Nobel prize in economics for his work on this conundrum—"industrial organisation", in the jargon."

New economics to support smarter regulation (OECD Forum)

On 28-29 May, the OECD held its Forum, its largest annual open event where economists and policy makers from around the world meet to discuss latest findings and chart the future. The Organisation also uses this high moment to deliver some of its flagship products, such as the Economic Outlook, or the new rankings of its Better Life index, both topics widely reported in the news, or announce diplomatic breakthroughs (for instance the signature at OECD of anti-tax haven instruments). It was expected that an organisation committed to "better policies for better lives" would have a lot to offer smart regulators, whose mission is to ensure more efficient public policies by assisting decision makers with better evidence about economic, social and environmental outcomes. Perhaps the best introduction to the abundant new literature is the 28 May press release "New approach to globalisation and global value chains needed to boost growth and jobs" which provides an entry point to the technical studies on a number of new topics and initiatives. Among the most significant issues is the shift to the "global value chain" approach to international trade, which is based on the fact that "what you do" (the activities of a firm or country) matters more to growth and employment than "what you sell" (the final product). The past decades have witnessed a strong trend towards the international dispersion of value chain activities such as design, production, marketing, distribution, etc. and this challenges how we look at economic globalisation and in particular the policies that we develop around it, such as trade, investment, competitivesss and other policies. A new book on the topic Interconnected Economies: Benefiting from Global Value Chains was also released during the Forum.
Another report released at the same time, New Sources of Growth: Knowledge-based capital (KBC), finds wide differences between countries in the levels of KBC investment, which includes inter alia IT systems, innovative property and economic competencies (including brand equity, firm-specific human capital, networks and organisational know-how). A finer approach to investment is therefore now necessary.
All these new concepts and data series need to be accommodated by smart regulation tools, such as RIA (a new way of calculating economic impacts), ex-post evaluation (which impact to look for), if regulatory policy to keep up with its mission: quite a challenge but an appealing task, so watch this space !

European policy courses relabelled "regulatory affairs"

Smart regulators are invited to take a look at an interesting article in European Voice, and other comments in the blogosphere (such as our LinkedIn group) about the new focus on Regulatory Affairs in European studies courses. EV notes that universities are giving them greater attention though it may be more a shift in labelling than a change of substance, according to Alberto Alemano, who is launching a "clinic" on EU policy and regulatory affairs for his law students at HEC Paris. “We used to talk about European policies and European law, and then we realised that most of the outcome of policymaking is about regulation. It is pretty clear that the privileged tool of European decision making is regulation.”
The HEC course covers theories of regulation, the regulation of markets and other economic activities, and EU regulatory governance. It concludes with current topics in regulation, such as financial supervision or prospects of the banking union.
At the University of Bonn, an existing EU studies master's focusing on regulation of the network industries will be broadened next autumn to include governance and regulation. It is clear that there is a shift and that regulatory studies are no longer the preserve of lawyers and people with a legal background, but require an interdisciplinary approach.
Also announced on LinkedIn, a one-day course on "How the EU Impact Assessment is changing advocacy: focus on 'New Comitology' (16-17 May) " From the announcement by A. Alemano: "As impact assessments are increasingly being performed by the Commission on delegated and implementing acts, new opportunities for substantive lobbying emerge. This one-day training will offer a unique opportunity to understand how your organisation may ask the Commission to run an Impact Assessment and also how to use it in the decision-making process. Our case studies will be based on the most recent and controvesial risk regulatory decisions such as Bisphenol A and Neonicotinoids. With a guest speaker from the European Parliament's newly created Impact Assessment unit, and former EU Commission officials and Court of Justice of the EU you will get a unique insight to the latest developments and get practical tips on how to work with IA in regulatory affairs."

How regulation influences companies' location

Emmanouil Schizas (London) points us to an interesting article published by the World Bank and entitled "Is better information always good news ? international corporate strategy and regulation." This paper develops a simple model to analyze the interaction between strategic corporate public good provision, international firm location and national regulation. An information-based strategic corporate public good provision mechanism is proposed to shed light on recent firm behavior within different regulatory environments.

Chinese Taipei puts smart regulation on the curriculum

For the second year running, Chinese Taipei (known more commonly as Taiwan) has organised a 5 day course on regulatory reform, as part of the 27th Academy of International Economic Affairs, a training programme offered to some 30 younger government officials, including 8 from friendly countries in Eastern Europe and Latin America.
Organised as a series of sessions equally distributed between presentations, structured discussions/brainstormings and group breakouts, the 30 hours gave enough time to cover the whole spectrum of skills necessary for government officials to produce clear and relevant policy and regulation, geared to sustaining and boosting the quality of the business regulatory environment and hence the competitiveness of their country: policy making, including quantitative techniques such as RIA, and legislative drafting. Best practices from around the world were called to illustrate the most relevant, up-to-date and effective skills that need to be mastered by officials.
This morning, the course members were smiling: the looming typhoon had decided to go South, leaving them the prospect of a restful and well deserved weekend before they tackle the next subject on the heavy Academy curriculum.

Why do bureaucracies fail?

An interesting post on Regblog reminding us of an excellent book that analyses the limits and failings of bureaucracy. Such insights are useful for regulators, who always depend on administrative agencies to collect information to support policies.
Senior American academic Donald F. Kettl reminds us of James Q. Wilson's 1989 classic, Bureaucracy which explores the reasons behind bureaucratic failures. "Wilson explains that different administrators, at different levels of the bureaucracy, have different perspectives, roles, and incentives. Too often, these roles fail to mesh, problems fall through the cracks—and, as a result, programs can fail, sometimes catastrophically.
He identifies three different levels of bureaucrats. "Operators" work the front lines, performing the most basic of an agency's work. They define the agency's culture by what they do, how they do it, and how they pass along the accepted modes of business. "Managers" are the critical shock absorbers between the front lines of operation and the often-turbulent political environment. Finally, "executives" guard the organization's turf, seek to preserve its autonomy, build political support, and struggle to secure the resources needed to do the agency's work."

New reference on regulation and risk (A.Alemanno e. a.)

Our co-experts André Nijsen, Alberto Alemanno and Frank den Butter have just edited a book called "Better Business Regulation in a Risk Society." According to the presentation on Alberto's blog, "the premise of this volume (available at Amazon) is that business regulations are expected to grow in the near future as a consequence of the emergence of a "(world) risk society." Risks related to terrorism, climate change, and financial crises, for example, will penetrate all conditions of life. Increasingly, the decisions and actions of some bring about risks for many in this era of globalization. Controlling these risks implies managing the world through high-quality regulation, with a particular emphasis on businesses and financial institutions. Central to this approach is the argument that a major, if not the primary, aim of regulation is to internalize externalities, or in a broader context, to repair market failure. Such repair can only be accomplished when the costs are smaller than the welfare gains."

Independence of regulators increases quality of regulation (CERRE)

From a discussion posted on the Smart Regulation LinkedIn Group (same editor as this blog) : the Centre on Regulation in Europe (CERRE) has published a new study demonstrating the link between greater independence and accountability of national regulatory authorities (NRAs) and the perceived quality of their regulation. The study has been carried out by Prof. Pierre Larouche, former CERRE Joint Academic Director and professor at Tilburg University and the College of Europe, Dr Chris Hanretty, researcher and lecturer in Politics at the University of East Anglia, and Prof. Andreas Reindl, professor at Leuphana University.
The CERRE site contains several other publications of great interest to smart regulators (examples : Enforcement and judicial review of decisions of NRAs ; Quantitative techniques for regulatory benchmarking).
The study is well timed, as there is renewed interest, inter alia in OECD, in assessing the relevance and performance of economic regulators, much of the ground work having already been published some years ago (example : « designing independent and accountable regulatory authorities for high quality regulation » 2005)
Among the comments, a suggestion for reading on regulatory reform : Regulation and Its Reform (1984) the best overview of the topic since Alfred Kahn's Economics of Regulation (197O).

Multimedia takes on regulatory reform

A visually impressive and also very interesting in substance presentation of the new integrated approach in our Flemish regulatory unit “Prezi” is available online, following the expert meeting in Nicosia reported earlier on this blog.
Also shown at that meeting, and now on Youtube, a short film about the film about the Electronic Company File: https://www.youtube.com/watch?v=O6bk3nIBz80

Fascinating: "I paid a bribe" world movement

How can citizens who do not have the luck to live in a (relatively) developped and corruption-free world react to the daily pressure from officials to be paid for services, such as registration of a birth or a marriage, admission to hospital, are normally free. This article from the NY Times reports the appearance of websites in several countries that denounce petty bribery, giving horrifying practical illustrations:

• The cost of claiming a legitimate income tax refund in Hyderabad, India? 10,000 rupees.
• The going rate to get a child who has already passed the entrance requirements into high school in Nairobi, Kenya? 20,000 shillings.
• The expense of obtaining a driver’s license after having passed the test in Karachi, Pakistan? 3,000 rupees.

The original ipaidabribe.com was created in August 2010 to collect anonymous reports of bribes paid, bribes requested but not paid and requests that were expected but not forthcoming and already comprises some 15,000 contributions. Others have since been set up in other countries such as China and Kenya.

OECD Council updates principles for smart regulation

The OECD Council endorsed on 22 March the Recommendation on Regulatory Policy and Governance. The text had been prepared by the Secretariat and discussed on several occasions with Member State delegates who shared national experiences acquired over the years, and best practices (see previous post). According to observers, this document updates thinking underlying regulatory policy to post-crisis environment and provides an instrument to direct efforts and monitor results in the improvement of the quality of regulation. See also the background on the "guiding principles" page of the OECD site and the dedicated brochure.

BR in EU, OECD, World Bank: differences & similarities

Better Regulation has been for some time on the agendas of these three major organisations. But do their policies and programmes have the same underlying principles, or does the same vocabulary cover different realities. That is what the author of this blog was asked to explore for a stakeholder event to be held next week. The major lesson from this comparison is that each organisation pursues policies in keeping with its overall mandate, and that the dissemination of the advantages of improved regulatory quality can be sought in a variety of ways:

• OECD, by drawing out lessons learnt from best practice, after discussion in its international forum, the regulatory policy committee, and making recommendations to members and partners;
• EU, by applying the principles to its own regulatory production, and getting its member states to follow suit, to improve the image of EU law and contribute to competitiveness;
• WBG, by assisting mainly developing and transition countries in tackling the practical challenges, regulatory and others, to improve the business environment and investment climate.

The text of the Powerpoint presentation is on line at http://regplus.eu/documents/fee.pps

Regulatory principles under scrutiny

As previously reported on this blog, the OECD is actively seeking the views of officials from regulatory agencies and ministries, the private sector, social partners and civil society at large on the possible update of the 2005 Recommendation on Regulatory Policy and Governance (closing date 1 July).  Though unconnected with this consultation, an in-depth review of the current OECD principles has just been published by Frank Vibert, senior visiting fellow at the LSE under the title “Regulating in an age of austerity: reframing international regulatory principles.” Reading this paper is highly recommended in the context of the current revision.

For discussion: new Regulatory Quality principles (OECD)

OFFICIAL ANNOUNCEMENT: "Call for comments on the Draft OECD Recommendation on Regulatory Policy and Governance."
"The Draft OECD Recommendation on Regulatory Policy and Governance updates existing OECD instruments on regulatory reform and management adopted since 1995. The OECD intends to produce a Recommendation that covers regulatory policy, management and governance as a whole-of-government instrument that can and should be applied by sectoral ministries and regulatory agencies. In undertaking this work, the OECD will hold meetings with BIAC and TUAC and is actively seeking the views of officials from regulatory agencies and ministries, the private sector, social partners and civil society at large. The OECD currently invites public comments both on the draft recommendations and the explanatory text and questions to guide the consultation process. The deadline for comments is 1 July 2011. For all the relevant information, please visit this webpage."
Please note that the email address for sending the comments is mailto:reg.reco@oecd.org .

Why"green tape" is good for business

At last year's OECD conference, one of the ideas new to some of participants was that environmental protection should not be viewed only a source of administrative costs, it actually boosted economic performance. This is confirmed by recent research: a new working paper from the National Bureau of Economic Research found that reducing ground-level ozone (a main component of smog) significantly improved worker productivity.

4th IRRC sees big picture

I was unfortunately not able to attend, but have had indications that the conference was a great success. All the contributions are now posted on the Bertelsmann IRRC page. The high number and diversity of papers presented at this event make it one of the most important moment in the regulatory reform year.
For the fourth edition, the organisers tried to cater for a perceived "hunger for renewal within the community", and go beyond the technocratic approach focusing more on instruments and techniques than on the political and societal context. They called for fresh ideas and a better view of the big picture, hence the motto of the conference "looking at the whole thing - the whole elephant" - a variant of the forest and the trees.
I examined the presentations and was pleased to find updates from all the major national projects underway (i.a. NL, UK, Canada) and some new approaches such as Kenya's (P. Chabeda on green growth). The most up-to-date technical expertise was reviewed (e.g. regulatory budgets, modelling for RIA). G. Pons summarized the recent development of smart regulation. Many thanks to Bertelsmann Stiftung and their partners (i.a. OECD, the World Bank Group, the Government of the Republic of Korea.)

Business licensing: a concern on both sides of the Atlantic

Our network now comprises an expert in business inspections and licensing reform, Florentin Blanc, who has just drawn our attention to the rise in the number of regulated professions. He points us to a Wall Street Journal article highlighting the "insane proliferation of professional licensing cartels" across American state government and examining some of the political economy behind it, which is that the licensing fees charged by licensing agencies can turn into profit centers reducing the need for more transparent forms of taxation.
This article has naturally sparked a lively discussion in the blogosphere (see example of such a post). The main issue is whether licensing mostly serves as a form of protectionism, allowing veterans of the trade to box out competitors who might undercut them on price or offer new services.
This type of development is of course in contradiction with the principles underlying the recent landmark Executive Order from President Obama which is too general to directly address such an issue. In the European Union, on the contrary, the Services Directive was the starting point of a major review of all regulatory requirements against the criteria of nondiscrimination, necessity and proportionality. This investigation covered different types of requirements such as prior authorisations, registration requirements, territorial restrictions, etc), which may constitute unjustified barriers to the functioning of the Single Market (obstacles to cross-border provision of services). The results to the "mutual evaluation process" have just been published by the Commission (27 January 2011). Merci Florentin !

RR update from the US president

Our friend Emmanouil Schizas has pointed out for us an important new presidential order dated today on our subject: "improving regulation and regulatory review." It is fairly brief, but updates quite a number of concepts that we BR experts use frequently, and is quite noteworthy. I will study it as soon as I get back from a RR mission in the MENA region.
Alberto Alemanno has posted an analysis of this important development on his website. The forthcoming issue of the EJRR will host a symposium with contributions from the US ( by Cass Sunstein) and the EC.