August 2001
What is regulation?
Defining regulation
Those who dare to define regulation find themselves working in a quagmire. As Margot Priest, W.T. Stanbury, and Fred Thompson (1980: 1) noted two decades ago: "Many individuals write about government regulation, often at great length; few bother to define the term." Some include any government activity that provides benefits or imposes restrictions. But as Doern, Hill, Prince, and Schultz (1999: 5-6) point out, defining regulation expansively leads to the following conundrum:
The wider the definition provided for regulation, the more it becomes equated with government and governance as a whole. But at some point governance is not merely regulation, and government is more than just a regulatory state. It also involves taxation, spending, and ensuring that diverse policy goals and values are implemented in democratic life. (Doern, Hill, Prince, and Schultz, 1999: 6)
Priest, Stanbury, and Thompson (1980: 5) resolve this dilemma by refining the definition of regulation to
the imposition of rules by a government, backed by the use of penalties, that are intended specifically to modify the economic behaviour of individuals and firms in the private sector. (1980: 5)
They distinguish regulation from other instruments through which governments can change economic behaviour to achieve public-policy goals: moral suasion, taxes, subsidies and public provision of goods and services (Priest, Stanbury, and Thompson, 1980: 2). In contrast to these other instruments of public policy, regulation relies on legal commands that are backed by penalties like fines, loss of license, charter or franchise, and even jail terms for non-compliance (Priest, Stanbury, and Thompson, 1980: 3; Strick, 1994: 4). Priest, Stanbury, and Thompson's definition of regulation is very similar to that used in a report to First Ministers written by the Economic Council of Canada. In that report, regulation is:
the imposition of rules intended to modify economic behaviour significantly and which are backed by the authority of the state. Such rules typically attempt to modify one or more of the following: price entry (e.g. permits and licences), rate of return, disclosure of information, attributes of a product or service (e.g. quality, purity and safety), and methods of introduction (e.g. pollution standards, worker health and safety standards). (Ostry, 1978: 15)
Priest, Stanbury, and Thompson (1980) and the Economic Council of Canada (1978) define regulation in economic terms, as they focus on rules backed by the state's authority that are intended to modify economic behaviour: the producing, consuming, and distributing of goods and services (Strick, 1994: 4). Rules imposed by government that are intended to change economic behaviour are found in two kinds of legislation: (1) statutes, more formally known as primary legislation; and (2) subordinate legislation, items of which are commonly referred to as "regulations." 3 This can be confusing because economic definitions of regulation include only those statutes and items of subordinate legislation (regulations) that are intended to affect economic behaviour and not all statutes and regulations have this intention. Priest, Stanbury, and Thompson explain:
Governments impose a very large number of rules designed to alter human behaviour. Many are based on moral or ethical precepts, for example, those in the Criminal Code. While the laws dealing with heroin or robbery have an economic impact, their justification and primary objective is the alteration of behaviour that is not seen as economic in nature. Economic regulation is intended to change economic behaviour. In general, the choice set open to individuals or firms is to be constrained. (1980: 5; emphasis in original)
Categorizing regulation
Policy analysts distinguish two categories of regulation: direct and social.4 Direct regulation and social regulation focus on different aspects of economic behaviour (Economic Council of Canada, 1979: 44). Direct regulation refers to circumstances where governments control price, rate of return, output, and structure of an industry. Direct regulation targets specific industries and is often combined with public provision of goods and services. Other names for direct regulation are "economic," "industry-specific," and "traditional" or "old-style" regulation (Economic Council of Canada, 1979: 44; Strick, 1994: 8).
Social regulation consists primarily of standards for health and safety, employment, environmental protection, and culture. Its focus is on controlling the attributes of goods and services, information disclosure, and the conditions under which goods and services are produced and sold. Unlike direct regulation, social regulation generally cuts across industries (Economic Council of Canada, 1979: 45). Other names for social regulation are "new style" or "new wave" regulation and "health, safety and environmental" regulation. The growth of social regulation and the simultaneous decline in direct regulation is called "regulatory shift" (Waters and Stanbury, 1999: 153). Pressure to expand social regulation has come from consumer interest groups, environmentalists, and labour unions (Strick, 1994: 8). Some of this social regulation, like the "ladder law" in box 4, does no more than codify common sense. Unfortunately, codifying common sense will not protect people who do not have any from injuring themselves.
|
Box 4 The Search for the Holy Grail: Certainty We have too easily succumbed to the siren song of regulation or rather . . . of comprehensive regulation. We [are] too easily moved by notions of rationalized completeness. (Philip K. Howard, The Death of Common Sense, 1994, p. 27.) Proponents of regulation argue that clear and detailed guidelines are necessary so that people will know exactly what is required of them. Ironically, today's regulations are simply too detailed for anyone to understand them fully. How can workers, or for that matter, occupational health and safety inspectors, know every detail in each of the 116 regulations that make up Ontario's Occupational Health and Safety Act? In addition, employees, employers, and inspectors are expected to know 61 pages of general rules described in another document entitled A Guide to the Occupational Health and Safety Act. If anyone violates the Act or its regulations, or fails to comply with an order from the inspector or the ministry, that individual could be prosecuted. The maximum fine for a corporation convicted of an offence is $500,000.* This drive for certainty has destroyed the function of regulations to act as guidelines. The following regulations on the use of ladders, for example, enacted under Ontario's Regulation for Health Care and Residential Facilities**--illustrates regulatory overkill. LADDERS 80 (1) Except for a step stool, a worker shall not stand upon a chair, box, or other loose objects while working. (2) A chair, box, or other loose objects shall not be used to support a ladder, scaffold, or working platform. 81 The maximum length of a ladder measured along the side rail should not be more than, (a) six meters for a step-ladder; (b) nine meters for a single ladder; and (c) thirteen meters for an extension or sectional ladder. 82 (1) A ladder shall, (a) have adequate strength, stiffness and stability to support any load likely to be applied to it; (b) be free from broken or loose members or other faults; (c) have rungs evenly spaced; and (d) be equipped with slip-resistant feet. (2) A wooden ladder shall not be painted or coated with an opaque material. 83. When a ladder is being used it shall, (a) be placed on a firm footing and secured against slipping; (b) if a ladder is between six and nine meters in length, be securely fastened or be held in place by one or more workers while being used; (c) if a ladder exceeds nine meters in length, be securely fastened or stabilized to prevent it from tipping or falling; (d) when not securely fastened, be inclined so that horizontal distance from the top support to the foot of the ladder is not less than one-quarter and not more than one-third of the length of the ladder; and (e) if the ladder is likely to be endangered by traffic, have a worker stationed at its foot to direct such traffic or have barriers or warning signs placed at its foot. 84. (1) When a step-ladder is being used as a self-supporting unit, its legs shall be fully spread and the spreader shall be locked. (2) No worker shall stand on the top of a step-ladder or shall use the pail shelf as a step. Rules can't save us from ourselves. The codification of common sense, as in the forgoing "ladder law" won't prevent people with little common sense from injuring themselves, and, in fact, may make the workplace less safe if the exercise of common sense is replaced by the notion that safety is somebody else's responsibility. * Ontario Ministry of Labour, A Guide to the Occupational Health and Safety, Queen's Printer, 1993. ** See Ontario Ministry of Labour, Regulation for Health Care and Residential Facilities--made under the Occupational Health and Safety Act, Toronto: Queen's Printer for Ontario, July 1995, pp. R-38 to R-39. |
info@fraserinstitute.ca
4th Floor, 1770 Burrard Street, Vancouver, BC, Canada, V6J 3G7
Tel: (604) 688-0221 Fax: (604) 688-8539 Book Orders: 1-800-665-3558 ext. 580
You can contact us at the above email address for any comments or information requests. Please report any dead links or technical problems.