Regulatory responsiveness and industry policy

Image result for new industries and regulationI’ve been arguing that our current approach to efficient regulation is blockheaded for as long as I can remember. I’ve even pointed out how one might possibly do quite a lot better with a less ideologically Manichean approach in which regulatory policy is a battle between Good (markets) and Evil (governments). I sketched out an alternative and tried to sell it as pro-innovation on the grounds that it’s easier to sell ideas through popular buzzwords – or to put it more charitably – when one can answer that difficult question that good business negotiators know they have to answer: “What’s in it for them?”

That meant that I could get funding to develop the ideas, but, it was all a bit abstract for innovation departments who mostly want to get those binoculars out and look around until they see some innovation and then ask how they could get more of it, their imaginations and the political economy of the exercise then turning to doling out money.

But it’s becoming possible to articulate lots of very concrete prospects for an approach to industry policy in which regulatory responsiveness becomes an important aspect of policy as the march of technology reconfigures one industry after another. Thus Jay Weatherill, the South Australian Premier has sought to promote investment in R&D in driverless cars South Australia by promising responsive regulation in the area. Just this afternoon I picked my son up from Paintball who, I discovered on speaking to them, had spent a few years with Victorian regulators to get their game suitable for over-16 year olds instead of over 18 year olds and to develop a slightly milder game for much younger age-groups.

That’s a drop in the ocean, but as I was sitting around I read this story in the Economist. Timber buildings are becoming much more viable, with an 18 story wooden building going up in Canada and a 40 story one in Stockholm on the drawing boards. There’s an 80 story concept building for London which, as you know has buildings named after household objects – as with the Gherkin, the Cheesegrater, the Can of Ham, the Walkie-Talkie and the Shard. The Economist suggests that the 80 footer wood building could be called the Toothpick. Be that as it may, as the Economist notes “One big obstacle to this wooden renaissance is regulation”.

I sketched out a similar idea – over a canvass that comprehended both service provision and regulation in my “Innovation without Money” agenda thinking particularly of health and education when I was Chair of Innovation Australia. But so far no dice.

After thirty years of its own and its progenitors’ existence, Australia’s Office of Best Practice Regulation shows no sign of thinking of this kind of thing. It has no ‘mission’ or ‘vision’ or other simple assertion of corporate religiosity. It is defined, not by its aspirations but by its functions which are focused inward towards government and are more or less exclusively reactive. It’s functions are outlined here and summarised on the PM&C website as:

assist[ing] policymakers to comply with the Government’s regulatory impact analysis requirements. It assesses Regulation Impact Statements and Post-Implementation Reviews and prepares regular compliance reports. It also publishes Regulation Impact Statements and Post-implementation reviews on the Best Practice Regulation Updates website”.

Anyway, there must be lots of other examples. Indeed I expect I’ve thought of some of them, and even documented some previously on this blog. In any event, I’d appreciate any commenters adding to the list.

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3 Responses to Regulatory responsiveness and industry policy

  1. conrad says:

    If you want a case of social regulation (rather than economic regulation) gone wrong then look no further than relationship laws. At present different states don’t recognize each others relationship laws, so the only way you can be recognized as in a relationship across states is via marriage (thus entirely eliminating gay people from being recognized as in a partnership across states). Thus Albury clearly is different to Wodonga.

  2. Jim says:

    Do the masterminds at the Office of Best Practice Regulation 9and the various State-based equivalents) still pursue red tape reduction where the benefits of regulation are not considered at all, while the relative costs are based on counting “restrictive words”?

    If that is “best practice” regulation, innovative and responsive regulation has no hope of getting up.

  3. Nicholas Gruen says:

    Their red tape reduction programs are usually based on fairly commonsensical ‘standard cost model’ assessments of the cost of regulation and I think those agendas make good sense. They look at a form and then make some back-of-the-envelope calculation of the time taken to fill it in, times the number of people who have to fill it in and then that’s the benchmark. It’s then fairly easy to reduce that compliance burden by streamlining or pre-populating the form, lengthening licence terms or automatic or streamlined renewals.

    It’s the only part of the reg review agenda that makes sense IMO. And it makes obvious sense. Oddly, Lindsay Tanner who was one of the few Ministers to take any of this seriously ruled out that part of the agenda by saying that he was against targets.

    I may be wrong, but from what I can see the OBPR does apply some methodology like this to measure regulatory burden.

    This leads to the somewhat ironic situation where most of the things the Government has celebrated on its national repeal day don’t generate concrete savings – because the regulation is typically redundant. So it’s just a clean up exercise. So if you look at the calculations in agriculture just to take one of the appdendices to the latest Red Tape Report you find “Improving regulation of low-risk stock and pet food products” where the department was able to report that “The OBPR has agreed that this will lead to an annual saving of $7.8 million in compliance costs”.

    A far more common entry is this one “• NB: This measure was part of the Omnibus Repeal Day (Autumn 2015) Bill. There are no regulatory savings or burden associated with this proposal.”

    Anyway, despite the disconnect between the measurement and what’s celebrated publicly, this reporting suggests that the government’s done pretty well with its red tape reduction agenda (and probably better than its Labor predecessor), whereas the ‘best practice’ regulation agenda remains mired in intellectual confusion and obfuscation.

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