Thursday, June 16, 2011

The OECD guidance on regulation

The OECD has published a draft recommendation on Regulatory Policy and Governance. They are seeking public comments by 1 July.

These documents become quite "dangerous", as in future domestic policy discussions the document will be cited as some kind of extra-territorial authority.

The document lists twelve recommendations. A flavour of them can be garnered from a sample;

1. Commit at the highest political level to an explicit whole-of-government policy for regulatory quality, with clear objectives and frameworks for implementation to ensure that, if regulation is used, the economic, social and environmental benefits justify the costs, distributional effects are considered and that the net benefits are maximised.

The Australian Government would argue that this is done through the deregulation function in the Department of Finance and the Office of Best Practice Regulation.

But let's unpack the OECD statement. It is no longer a simple CBA we are being asked to do before regulating. We are explicitly invited to consider social and environmental benefits as well as economic. We are invited to consider distributional impacts and that "net benefits" be maximised. Ultimately there is no "calculus" on which the three kinds of benefits can be computed and combined (short of the economic technique of determining the public's willingness to pay for the social or environmental benefit), and there is certainly no calculus to balance the net benefits against distributional effects.

The way we balance these things is actually called politics.

7. Develop a consistent policy covering the role and functions of regulatory agencies in order to provide greater confidence that regulatory decisions are made on an objective, impartial and consistent basis, and avoid the risks of conflict of interest, bias or improper influence.

This recommendation is very appropriate for Australia where we have a proliferation of "regulators" (e.g. ACCC, ACMA, APRA, ASIC, TGA) and no meaningful over-arching defining law to define "regulators". It does introduce the prospect that a new act be introduced, the Regulatory Agency Act, that would cover the formal parts covered by the CAC and FMA Acts, but could include generic rules of process. Individual regulators could be created under the provisions of that Act - in the process reducing a lot of duplicated pages in current enabling legislation.

I haven't yet read the OECD document in detail. I probably should - but my reading will be tinged by anger at the underlying principle that regulation is equated with economic loss.

Novae Meridianae Demetae Dexter delenda est

No comments: