Why ‘how to regulate’ guides are invariably nice and colourful but impractical

25th May 2021

It would be unfair to name the particular public body responsible but a new guide to regulation has just been published.

The guide is lovely to look at.

Pages and pages of colourful graphics, with boxes and arrows.

A well-meaning sequence of platitudinous or vague statements are made which together are to be taken as a guide to good regulation.

The guide is pretty and clever and earnest.

And the guide seems completely useless.

One suspects no better regulation will be made because of it, nor any better regulatory decision.

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The problem is not that, on its own terms, it is wrong.

On its own terms, the guide is quite wonderful.

Like a self-contained and lovingly illustrated code in some invented language like Dwarvish or Klingon or Dothraki.

The obscure illuminated manuscripts of our public policy age.

But the guide – and many guides like it – may not correspond to reality.

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The essence of regulation is practical, not theoretical.

The basic question is: what behaviour or outcome would happen (or not happen) but for the regulatory measure?

How will things actually be different (or the same) because of the intervention (or lack of intervention)?

And will those things really be more desirable than otherwise would be the case?

If the regulatory measure – either a rule or a decision – does not in practice affect behaviours or outcomes as desired, then it may be many things but it fails as a regulatory measure.

So: the best guide to regulation is work backwards from what is happening (or otherwise would happen) and see how that behaviour or outcome can be made to be different (or forced to stay the same) in a way desired.

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The problem with flowchart-based – and also with checklist-based – regulation is that it makes the regulator feel that something is being done.

Like the old joke about the driver who always looks in the rear-view mirror before pulling out – it does not matter what is coming, as long as they have looked in the rear-view mirror they can proceed to pull out.

In so many fields of human activity – from drug-taking to sex work to public health rules for coronavirus and electronic surveillance and public procurement (just to take a few public policy bug bears) – there is a belief that there must be regulations, as something must be done.

The problem with colourful guides on ‘how to regulate’ the process takes priority over practical effect and implementation.

There should perhaps be a new regulator to prevent flowchart-based regulation.

Perhaps it can be called OffChart.

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12 thoughts on “Why ‘how to regulate’ guides are invariably nice and colourful but impractical”

  1. At the risk of being pedantic, a document could not be written in Dwarvish, because Tolkien never created a grammar or vocabulary or writing system for Khuzdûl (though the elements he did provide suggest it might have resembled the Semitic languages), in contrast to his detailed history of the Elvish languages (Sindarin and Quenya).

  2. Perspicacious as ever. I wonder what would be the implications if your comments were applicable to codifying a constitution for a modern democracy?

    I can’t get OffCharter88 out of my head now

  3. Given our Prime Minister’s fondness for Churchill your Regulator of Flow Chart Regulation might get off the ground if called Chart Well.

  4. A regulator needs the humility to understand that they cannot obtain a perfect outcome, that all interventions have negative effects as well as the ones they intend, and the best they can do is trade these off. This must also be understood by those who instruct them.

    I recall one major regulator increasingly putting out documents that implied it could fix anything. It even invented a new criterion for assessing many small decisions, which amounted to saying that they will always do the best thing, but failed to realise that it was not practical as an objective and transparent assessment criterion you can apply at a detailed level. A little later, following massive public disquiet, the government decided that regulation in that sector was in a complete mess and passed legislation mandating a new approach. It was doubtless not best either, but what was going on was not tenable.

    The existence of trade-offs in regulation is well-known by experts. It is demonstrable by strong theories which have a similar role in economics as the 2nd law of thermodynamics does in physics. Increasing risk increases cost, but reducing risk reduces incentives to be efficient. Reducing the ability of firms to differentiate reduces competition, but increasing it increases their ability to rip off unengaged customers. The best you can do is choose your favourite balance along these trade-offs. But this isn’t good enough for our masters who don’t get it, who instruct problems to be solved. The result is oscillations in policy as certain things must be solved, but the solution inevitably increases other problems, that then have to be addressed.

  5. Does regulation actually change behaviour?

    The incentives in place before the banking crisis ensured that regulations were circumvented at best, ignored at worst – they weren’t called Liar’s Loans for nothing

    Surely it’s incentives that change behaviour, and financial incentives always seem to trump regulations

  6. That sort of job is farmed out to a consulting firm – with shiny shoes and a few creatives. The shiny shoes understand perfectly what is required – motherhood and apple pie – and the strict avoidance of any real issues with a good layer of CYA.

    A better example is the aeroplane business – at least until the Boeing event. They at least seemed interested in getting to the real issue. In their case the real issues are usually politically non contentious. Where the issues are politically contention – pile on the motherhood and apple pie.

  7. I am constantly astonished at how badly statutory instruments are drafted. For example the recent Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 requires the ‘lectrics in rented properties to be inspected every 5 years. But by its wording, a landlord could simply employ a suitably qualified electrician to write a report indicating whether the installation complies with the principles of Fung Sui.

    On the other foot, if an electrician withheld the report from the landlord, the landlord could be fined £30k.

    Surely it’s not too much to ask the drafter to spend a morning thinking though how each of the actors could abuse the rules if so motivated, or whether actors in good faith could still fall foul of the rules, or whether under all those main permutations the rented property will be safe.

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