1 Introduction
This paper focuses on improving the quality of all forms of regulation imposed by government. It surveys basic concepts surrounding the regulatory activities of government, focusing on incentives faced by regulators, and reviews New Zealand practice to identify priorities for future actions to improve those incentives. The choice between different types of regulation, such as prescriptive versus performance-based or rate of return versus CPI – X, is not therefore addressed here.
Regulation is defined as the employment of legal instruments for the implementation of social-economic policy objectives and broken down into economic and social regulation (den Hertog, 1999). Economic regulation can be structural, through restrictions on entry and exit and qualifications, or conduct, such as price control, advertising restrictions and quality standards (den Hertog, 1999).
In the New Zealand context, regulation includes statutes (legislation), statutory regulations (Orders in Council) and quasi-regulation (a wide range of standards, guidelines etc issued by Ministers or departments under the authority of statute or statutory regulations). Quasi-regulation is subject to less scrutiny than the other forms of regulation.
The paper begins by discussing, and then briefly reviewing, basic taxonomies of the benefits and costs of regulation; major theories of regulation, the concept of “regulatory illusion”, the incentives faced by regulators and regulatory failure in Section 2. Section 0 examines how regulations are implemented, discussing institutions and instruments, comparing performance-based and prescriptive approaches to regulation and outlining the components of an integrated environment for ensuring high quality regulation. The paper then addresses past approaches to modifying the process of forming regulation within government overseas and in New Zealand in Section 4, before considering future paths to improve outcomes both domestically and trans-Tasman. Concluding remarks are made in Section 5.
The paper assumes that any changes to regulatory systems would have to operate within existing constitutional, political and judicial institutions. The aim therefore is to identify how, within existing constitutional constraints, to best ensure that whatever regulation is put in place in future achieves the maximum excess of benefits over costs. As a general survey, rather than an in-depth investigation, it also does not seek to identify any particular level or type of regulation to be desirable or not, or to identify any specific regulatory regimes as being priorities for reform.
