Governing through Regulation

Public Policy, Regulation and the Law

Eric Windholz

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317387701
• Edition: 1
• Topic: Business
• Subtopic: Contabilità statale
• Index: Business

Over the past forty years, numerous theoretical advances have been made. From Ayres' and Braithwaite's ground breaking work on 'responsive regulation', we have seen models of 'smart regulation', 'regulatory governance' and 'regulatory capitalism' emerge to capture the growing prevalence and importance of regulation in modern liberal Western capitalist societies. Important advances also have been made in the practice of regulation, with regulators evolving from traditional enforcement focussed 'command and control' models to being 'modern regulators' with a suite of diverse and innovative regulatory tools at their disposal.

The book presents and critically examines these theoretical and practical developments from the perspective of governments who design regulations, and the regulators that deploy them. In doing so, the book examines the various forces and interests that influence and shape the regulatory endeavour, and the practical challenges facing governments and regulators when deciding whether and how to regulate.

This volume is a study of regulation in context: in the context of the public policy it is designed to deliver; the law that enables, shapes and holds it to account; and the evolving societal and institutional frameworks within which it takes place.

Aimed to provide innovative cross-disciplinary conceptual frameworks that regulators, regulatees, those whom regulation is intended to benefit, and academics, might employ to better understand and undertake the regulatory endeavour. This will be of great interest to researchers, educators, advanced students and practitioners working in the fields of political science, public management and administration, and public policy.

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Part I
Introduction

1
Introduction

This book is a study of regulation in context: in the context of the public policy it is designed to deliver; and the law that enables, shapes and holds it to account. It also is a book for its time: a time when regulation has come of age as a primary tool of governance; and a time when those charged with its formulation and implementation are facing unprecedented challenges and pressures.

The past forty years has seen a dramatic increase in both the volume and breadth of regulatory activity.¹ In traditional economic areas of commerce and competition, and traditional social areas of health, safety and consumer protection, regulation has increased in number and complexity. At the same time, new regulatory arenas have emerged in areas as diverse as the environment, biotechnology, the internet, equal opportunity, privacy, human and animal rights, and human reproduction, to name but a few. This same period also has seen increasing use by governments of independent regulatory agencies to govern these areas.² Perhaps, as some commentators have observed, we are living in the ‘golden age of regulation’.³

But what explains this dramatic growth in regulation? The answer to this question lies in the complex and complicated world in which we live. Increasing reliance on market mechanisms to deliver government services, rapidly evolving social mores and the pace of technological change have combined to fundamentally alter the nature of commercial and social activity, creating both new opportunities and new risks. Governments find themselves simultaneously being asked to create an environment in which innovation, new technologies and markets can flourish while protecting citizens from the worst excesses of these forces; to safeguard an ever-increasing array of rights and to provide protection from an ever-increasing array of risks; to balance market efficiency with societal demands for justice, equity and fairness; and to do so in a manner that minimises the compliance burden on regulatees, the fiscal burden on taxpayers and the regulatory burden on society generally.⁴ And all of this at a time when many people’s confidence in governments’ ability to address the challenges of the 21st century is diminishing.⁵

The growth and increasing complexity of regulation inevitably attracted the attention of academics from different disciplines, including public policy, law, public administration, politics, economics and sociology. It also has seen the study of regulation evolve from an issue on which these disciplines have something to say to become a discrete discipline with its own theories, concepts, technical language and accumulated body of specialist knowledge. Numerous theories have been developed to explain the growth, nature and importance of regulation in modern democratic liberal capitalist societies,⁶ with terms such as the ‘regulatory state’, ‘regulatory capitalism’ and ‘regulatory governance’ entering our lexicon. Important advances also have been made in the practice of regulation, with regulators evolving from traditional prescriptive ‘command and control’ models to become ‘modern regulators’ employing a range of ‘responsive’, ‘smart’ and ‘better’ regulatory techniques designed to persuade, assist, incentivise and nudge regulatees to comply with standards that are performance-based and outcome-orientated.⁷

The rich body of knowledge that has developed explaining the regulatory endeavour contains valuable lessons, insights and perspectives to assist us to better design and deploy regulation in the public interest. At the same time, however, this body of knowledge has become increasingly complex and contested. For every theory, there are one or more alternate or counter-theories, and numerous critiques. Moreover, many academics are more inclined to write for other academics than for policy-makers, regulators, practitioners and students of the area.⁸ The typologies and classification systems they develop to explain and differentiate between aspects of the regulatory endeavour often employ labels and terms, and draw distinctions, that are not intuitive to the regulatory community.⁹ In this regard, it is not surprising that the theoretical advance to gain the most traction amongst them is Ayres’ and Braithwaite’s enforcement pyramid that is inductively based on the practice of regulators and expressed in language familiar to them.¹⁰

The aim of this book is to assist people to understand and navigate the regulatory endeavour without being overwhelmed by its complexity. The first step in achieving this aim is to define the terrain being navigated, being the core concepts that give the book its title: governance; public policy, regulation and law.

Core Concepts

Defining the book’s core concepts would not be necessary if these terms had universally accepted meanings. This is not the case, however. These are concepts about which many disciplines have many different things to say, with different disciplines using alternative words to describe the same thing, and the same word to describe different things. Moreover, new labels and buzzwords are constantly being devised—sometimes to describe a new (or newly discovered) phenomena, or to rebadge an existing phenomena with a new but not always significant edge. The semantic confusion this creates is further complicated by the tendency, once a label gains traction and currency, ‘to affix to it all of the other fashions of the day’.¹¹

No attempt is made here to cover all the different meanings ascribed to each concept, or to explain the nuanced differences between them. Nor will we attempt to craft definitions capable of universal application. Their variability is such that any attempt to do so would be an exercise in futility. Rather, this book’s approach is guided by the practical advice of Black that what is important is what we want to do with a concept rather than what a concept ‘means’ in some fundamental sense.¹² We also are guided by Jordana’s and Levi-Faur’s advice that rather than look for exhaustive and consensual definitions across different disciplines and research agendas, we should allow the specific context and goal to shape the particular meanings given to concepts.¹³ Our goal here is to examine the phenomenon of governing through regulation; its context is the public policy it is designed to deliver and the law that enables, supports and holds it to account. It is this goal and context which underpins the meanings given to the book’s core concepts.

Governance

The term ‘governance’ derives from the Latin gubernor, meaning to ‘pilot, steer or direct’.¹⁴ The act of steering or directing is central to its meaning. However, it also allows for great variation with respect to what should be steered or directed, by whom, and how, leading some to ‘lament the multiple and sometimes ambiguous meanings given to it’.¹⁵ The term has been used to describe an ever-increasing variety of decision-making methods,¹⁶ and has been applied to nearly every aspect of collective life from countries and societies through to universities, clubs and corporations. Indeed, Hughes observes that ‘corporate governance’ is one of the more theorised applications of the concept.¹⁷

This book is concerned with the governance of societies through regulation. The governance with which it is concerned is ‘public governance’. Public governance generally gives government a privileged role, placing it at or near the centre of the endeavour. However, ‘government’ is not the same as ‘governance’. ‘Public governance’ is the manner, method or system by which a particular society is steered or directed;¹⁸ and ‘government’ is the set of institutions that steer or direct (or coordinate the steering or direction) of that society. This is not to suggest that government is the only institution steering or directing society. Governance increasingly is understood as requiring ‘the active participation of a range of actors in addition to government itself’.¹⁹

Within the realm of ‘public governance’, many typologies or systems of classification exist, each with its own focus and emphasis. Some typologies classify governance by the instruments or tools employed to govern;²⁰ and some by the resources of government.²¹ Two classifications of particular relevance for the focus of this book are those that classify governance by the mode of steering and by the functions of government.

Knill and Tosun identify three principal modes by which societies are steered and directed: hierarchical governance, governance by markets and governance through networks.²² Hierarchical governance has the state steering directly and from above, either through the provision of common goods (e.g., infrastructure, education, health services), or by controlling societal behaviour and conduct though rules and regulation. Governance by markets, on the other hand, sees societies steered by the ‘invisible hand’ of the market aggregating individual preferences expressed in the market place. Under this mode of governance, the market (not government) is considered the best vehicle for delivering outcomes in the public interest. This is not to say that there is no role for government, however. In modern societies, markets cannot function effectively without some laws and regulations to ensure that contracts are honoured, consumers are protected and businesses are constrained from engaging in anti-competitive conduct. The third mode, governance through networks, challenges the assumption that either governments or markets alone can best order society. Rather, it envisages governments collaborating through networks of public, non-government and private actors to address public problems and pursue public opportunities with respect to which they have mutual or interdependent goals.²³

An alternate but equally useful lens through which to view governance is the functional classification employed by Braithwaite, Coglianese and Levi-Faur.²⁴ They conceive of government and governance being about three things: providing goods, services and infrastructure; distributing and redistributing wealth; and regulating behaviours.²⁵ They further observe that of these three functions, regulation is the expanding part of governance, a theme to which we will return in the next chapter.

If governance is the manner, method or system by which a particular society is steered, this leaves open the question—how are decisions made about which method of steering to use, and in which direction? This is where public policy comes in.

Public Policy

Numerous definitions of the term ‘public policy’ exist.²⁶ Maddison and Denniss classify these definitions into two categories.²⁷ The first category represents what Maddison and Denniss term the ‘classical view’. According to this view, public policy is an authoritative choice of government based on plausible hypotheses designed to deliver the government’s objectives and desired outcomes. This view presents public policy as a rational, systematic and hierarchical process in which problems and/or opportunities are defined, options developed and evaluated, and rational, evidence-based choices are made by a government or a government official in an authoritative position. The second category is in many ways the antithesis of the first. According to the second view, government is less the decision-maker and more the arena or space in which a range of actors with divergent positions and interests interact. This view presents public policy as an inherently political process through which competing interests and values are weighed and balanced and compromises made. In this book, we take the position that public policy has elements of both views—that it is an authoritative choice of government based on plausible hypotheses designed to deliver the government’s objectives and desired outcomes; that (in most cases) it employs rational, evidence-based processes; but that it also is informed and influenced by interested actors with different degrees of power and influence; and that the final outcome is the product of evidence rationally assessed, societal values and realpolitik.

Like governance, many systems of classifying public policy exist.²⁸ Some classify publi...