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regulation |
> effectiveness
of incentive regulation
> component
based business
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Does one have to be an economist to imagine that it's the quantity of regulation or deregulation that matters, rather than the quality? In other words, measuring red tape as a commodity, dispensed by the centimetre. In my view, what's often wrong with regulation is not that there's too much of it, or too little, but that it's at an inappropriate logical level - at the wrong level of abstraction. Ineffective regulators are swamped with data that they cannot process, and try to eliminate variety that they cannot understand. The answer might be - better, wiser regulation. |
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The Effectiveness of Incentive Regulationveryard projects > component-based business > regulation > incentive |
In the US telecommunications industry, incentive regulation has been an important regulatory tool in promoting technical efficiency. However, a recent study concludes that incentive regulation has had no discernable impact on technical efficiency between 1988 and 1999.
N.D. Uri, Technical Efficiency in Telecommunications in the United States and the Impact of Incentive Regulation. Appl Math Model Vol 27(1) pp53-67, Jan 2003.
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Forms of Regulationveryard projects > component-based business > regulation > forms |
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Structural | Barriers to entry / exit. Chinese walls. |
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Process | Licensing and tariffing laws. Price and wage controls |
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Incentive | |
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Information | All participants in a market must account for their activities in a standard way. |
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Self-Regulation | The participants in a market set and enforce appropriate policies. |
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Regulation Issuesveryard projects > component-based business > regulation > issues |
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Too much / not enough regulation | Regulating the quantity of "red tape". |
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Regulation interference | Clash between multiple regulations or agencies with conflicting or overlapping objectives. |
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Regulation effectiveness | Assessing the extent to which regulatory policies and mechanisms achieve their original purpose. |
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Model-Based Regulationveryard projects > component-based business > regulation > model-based |
Does one have to be an economist to imagine that it's the quantity of regulation or deregulation that matters, rather than the quality? In other words, measuring red tape as a commodity, dispensed by the centimetre.
In my view, what's often wrong with regulation is not that there's too much of it, or too little, but that it's at an inappropriate logical level - at the wrong level of abstraction. Ineffective regulators are swamped with data that they cannot process, and try to eliminate variety that they cannot understand. The answer might be - better, wiser regulation.
In one regulated utility, the utility companies send spreadsheets to the utility regulator, where they are analysed. The analysis is based on implicit models that are hardwired into the working practices. (Of course, a model of the human activity system (in the utility company or the regulator) may need to include something on spreadsheet manipulation.)
In comparison, the Bank of England has a much more sophisticated way of regulating the banking industry. It demands that each bank has an explicit model of risk, and be able to map capital adequacy against this model.
How do the utility companies play against this regulatory game? At the macro level, regulation may be understood as a simple two-person game. However, within the organizations, there are people who are overwhelmed with data whose significance is unclear to them. The macro-level model is of little value to them.
How do we agree nature of expected shift in industry structure?
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Model-Based Management |
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Regulation Interferenceveryard projects > component-based business > regulation > interference |
Clash between multiple regulations or agencies with conflicting or overlapping objectives.
For example, one agency may wish to encourage collaboration between firms to deal with (say) environmental issues, while another agency may see this as anti-competitive.
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Self-Regulationveryard projects > component-based business > regulation > self-regulation |
| Self-regulation can often help erect barriers to entry. However, self-regulation only works for those that want to remain in the game, it cannot provide effective barriers to exit. | |
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Australian
Government Task Force on Industry Self-Regulation: Draft Report
Industry Self-Regulation without Sanctions: The Chemical Industry's Responsible Care Program (Andrew King & Michael Lenox) |
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Deregulationveryard projects > component-based business > regulation > deregulation |
According to Regulation.Org,
an American website devoted to deregulation
Some 55 federal regulatory agencies and more than 130,000 staff develop, implement and enforce a myriad of regulations, with more than 2,000 new rules issued every year. According to Professor Thomas Hopkins of the Rochester Institute of Technology, regulations now cost more than $721 billion. The costs of "social" regulations alone, particularly environmental regulation, has almost tripled over the last twenty years from about $80 billion in 1977 to more than $267 billion in 2000.
| ARTICLE | The Birth, Death, and Resurrection of Regulation by Steven Hayward |
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Industry Regulation and the Performance of the American Economy by Paul W. MacAvoy |
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This page last updated on January 13th,
2003
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