Part of the problem with moving to a consolidated regime is that too many market actors have captured the existing regulators and they don’t want to lose that control. Insurance is a good example. The requirement that an insurance company that wants to operate in all 50 states must seek a license in all 50 states and get all of its products licensed in all 50 states is a HUGE barrier to entry and reduces competition in the insurance markets. Consumers end up footing the bill for this.

I have discussed the agency capture issue in more detail in my article on creating a US FSA, which discusses the pros and cons of a consolidated regulatory regime, and is available at SSRN: http://ssrn.com/abstract=757010

U.S. tax law is found in U.S. Code Title 26. Regulations implementing the code are in the accompanying section of the Code of Federal Regulations. I’ve heard an endless parade of politicians and commenters decry the “IRS code,” when in fact every word of U.S. tax law was passed by a Congress and signed by a president.

It’s more legitimate to criticize the way in which Treasury regulations implement a section of the U.S. Code, if one can make a case that the interpretation is not reasonable under the law. Pretending that a provision of the U.S. Code is an IRS creation, in contrast, is an old dodge.

Still, it’s generally accepted here that regulation is supposed to facilitate the achievement of desirable outcomes, not ensure compliance with a fixed set of rules.

Hi Peter—I’m not sure exactly what your intuition is connecting performativity with regulation, but it sounds interesting. Please spell out some more.

Pass a law stating that it is unlawful to break in through the front door to steal the money. When someone breaks in through the back door instead, a law is passed stating that it is unlawful to break in through the back door, at which point people begin to break in through the windows. Etcetera ad nauseum.

The point of the law is to prevent anyone from stealing from the damn bank. Instead of stating that plainly, we devolve into a game of whack ‘a mole.

This seems to be exactly what has happened with our financial sector, however. Granted, my analogy is somewhat inverted when applied here, because it is more practical to state explicitly what one can do, and all else is verboten. You may do x,y, and z. If you have an ‘innovation’, it must be subjected to a b/c analysis by an oversight agency . If it is determined to be another way to mislead and defraud people, it will not be approved as a business practice.

The usual paradigm, which has been successfully pushed, at least since Nixon if not Eisenhower, is meta-regulation, a form of self-regulation. The FAA does not inspect planes; the FAA inspects the airline system that inspects planes.

The chief vulnerability of any system of meta-regulation is that, in its abstract nature, it loses all touch with reality. And, the regulated players will work the system to prevent the flow of feedback, which would allow command-and-control to emerge from time to time. The FAA will be told the number of incidents (the numerator), but not the related denominator.

Command-and-control schemes for political regulation are problematic because innovation in business consists largely of developing new command-and-control schemes for managing business processes, while politics depends on being able to institutionalize paralysis and hand off responsibility to technocrats—the technocrats rely on the underlying political paralysis as their institutional foundation. The EU has taken technocracy to new heights, because the EU has the deepest foundation of institutionalized political paralysis conceived since Rome.

There was a short story published several years ago called “Wouldn’t Giving It a Name Just Make It Worse?” I was reminded of this when I saw the term “Objectives-Based Regulation”. There are a number of problems with this label, not the least of which is that it implies a paucity of objectives in any regulation that came before the blueprint, including those in play today. I think the ideas behind OBR are probably pretty sound, but as public policy goes, it’s probably better not to burden a good idea with a faddish name.

The best approach is pobably to ignore everything they propose until the rubbish is hauled out of the executive branch after the next election. A parliamentary form of government in the US would have spared America and the world several years of ruinous graft and incompetence. Blair is gone; Bush will remain with us for many more debilitating months.

I would think that the real stand out in performance based regulation is the EU. This is kind of a humourous outcome, I hear it often said that the US is a “free-market” economy, and yet their regulatory system is a extensive old-school command and control system (with the exemption maybe of guns and the labour market). the california consumer agency licences 230 professions!!

In contrast the EU is much more up to date in modren performance based regulation (for example the EU General safety Directive vs the US Product Safety Commission).

I am not quite sure why the US is so far behind in regulatory reform. the debate on performance based regulation is from 15 years ago. Is it becasue in a Parliamentary democracy the more unified government has the ability to drive regulatory reform than the balkanised US system?

If this is close, shouldn’t we be seeing performativity folks enter in at some point to show how theory->practice->confirming the theory? Or is that just glib?

Or, perhaps, like the NCAA recruiting handbook.