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Contemporary Trends in Regulation

Updated: Dec 1, 2022

Most academics and consultants focus on trends in improved data (including data sharing and analytics) as catalysts for change and improvements in contemporary regulators. While important, the perverse impact of such emphasis is the unfounded belief that better regulation derives from better data. That is, if you have more data, the regulator will make better decisions.

The ability to influence decisions, design and strategy in an organisation often depends on situational awareness – especially of emerging issues, trends and drivers. Situational awareness for regulatory decision-makers is centred around their need for tailored regulatory intelligence on the harm and threats faced, tempered by the factors influencing the decision-makers’ ability to balance better practice principles (usually: fairness/equity, proportionate, targeted, accountable, transparency/clarity, etc). Most think the best way to achieve situational awareness is to have access to data. This sounds reasonable for most academics and performance review officers; but is profoundly false. Many regulators have become awash with data and still have little situational awareness; or can even loose situational awareness the more data they have.

Most of the contemporary regulatory issues – culminating in the regulatory response to SARS2COVID19 – are of a more complex nature than acquiring more data or better computer systems. In no particular order, these include regulatory independence, virtue compliance, the value of specialists, and contrived regulatory problems.

Regulatory Independence.

To meet regulatory principles of fairness, transparency and accountability, all regulators need some sense of separation of operational decision-making from the policy arms of government and those entities they regulate. This concept is often difficult to achieve in practice due to the competing drivers of:

· Efficiency. Smaller regulators often need to be embedded in policy arms of government to reduce the encumbrance of administrative overheads. This has the negative effect of tying the regulator to potentially irrelevant and deflective corporate processes; especially in relation to performance reporting, branding, efficiency dividends, training, value-setting, virtue-signalling etc.

· Policy and Power. Any regulators’ reporting of the unintended consequences (harm and threat) arising from poor policy positions tends to compete with the politics of positive program reporting. Hence, keeping portfolio regulators within Departments keeps them chained to the Department’s messaging system. Also, having regulators embedded in Departments means a boost to direct reports; which in turn increases the standing and power of the position of that Department/Secretary.

· Public servant (personal) interests. Heads of statutory bodies are usually appointed under an instrument and contracted for a set period. Public servants are often personally discouraged from leaving their permanent tenure to be appointed to such positions. Hence, it is becoming commonplace – especially for the many small regulators – to appoint an existing public servant to the position and combine the regulatory role with other Departmental functions. This has the advantage of potentially giving the regulator increased gravitas inside the Department but perversely greatly diminishes their sense of independence.

Virtue Compliance?

Another big pressure is adding 'virtues-compliance' to our traditional view of 'rules-compliance'. For those regulators monitoring the performance of businesses and government engagement there is pressure to assess ideologically driven moral attributes that are not easily linked to business performance, compliance or, especially, harm. Most regulators will naturally consider ‘values’ at some stage of their assessment of organisational performance of a business they register or licence. The values exhibited by the business are important in that businesses’ viability/sustainability, goals, probity, governance, ability to self-assure compliance, and treatment of people. This is important and necessary; and can be linked to a sense of regulatory harm and threat.

However, it is a ‘slippery slope’ from values to virtues in any compliance assessment or monitoring. Indeed, enforcing virtues can – if applied too vigorously – forcefully adapt business to become an expression of government interests. Virtues are subjective value-sets that manifest from individual experience and are difficult to impose on others with differing experiences. Imposing one set of virtues on others occurs in shifts to socialist systems and ultimately hinder private companies and individual expressions of freedom to be productive. Some modern examples of virtues include: the Australian medical registration authority requiring medical practitioners to only espouse state government medical officer directions; regulators not considering the merit and experience of company members, but rather their gender and racial alignment; regulators requiring companies have policies in place that have no connection with their jurisdictional interests or the performance of that company including in the domains of environment, employment, financing, investment, etc.

Value of specialists and modellers.

Regulators have always relied on the advice of industry experts to understand behaviours and the at-risk decision-contexts in their jurisdictions. The open information systems available now through social media and the internet, plus big data-holdings in regulators, has led to a plethora of voices contributing to this advice and many self-proclaimed experts. Where supported by data-modelling, self-interested experts can create a bow-wave of opinion that regulators find hard to out-compete in terms of messaging. The SARS2COVID19 regulatory response showed clearly how self-proclaimed experts can lead public policy astray by gaining a platform and using misleading data. Key data-modelling was falsified and not related to harm. COVID data-modelling is on par with environmental data-modelling for its level of absolute predictive failure. Environmental activism based on false data-modelling is also currently skewing regulatory focus by inaccurately presenting harm and the solutions to addressing that incorrect harm. The same is true across many social services spaces including in illegal drug use, homelessness, racism, etc. Many business-models in such circumstances rely on maximising the harm instead of reducing the harm to gain influence and financial benefit. (See M Shellenberger’s wonderful expose of the social services response in San Fransicko: Why Progressives Ruin Cities, 2021).

Hence, not only do regulators face the problem of dealing with avoiding their own data-myopia, they have to deal with the ‘false-flag’ messaging of interest groups. The misuse of data by experts puts pressure on regulators to respond to no-harm issues In some circumstances it may even create a false harm context that a whole new regulatory regime is generated to counter. Increasingly, to assess the merit of experts one needs to analyse the money trail behind them or any benefits accrued from the contrived outcomes sought.

Contrived regulatory problems.

These pressures then lead to contrived regulatory problems which become increasingly difficult for the regulator to justify enforcing behavioural change on previously innocent parties. For intelligence systems, the traditional analysis of threat and harm becomes skewed as it is the policy construct that is the real threat and creates the real harm. That is, the policy position of government and the implementation of that policy is the driver for noncompliance. Without the policy or with a different policy, there would be no noncompliance. This effect is complicated where an industry forms as part of a solution to a social, financial or political need, and, when this industry is no longer necessary, increased regulation is a tool used to sustain it. This became very evident in the SARS2 global response but some other contemporary examples are:

· Plastics recycling – in which the pollution problem can now be more effectively resolved through destruction yet an industry has been constructed around inefficient recycling practices and there is a political interest in sustaining it through regulating behaviour

· Energy – which can be cheap and reliable, but investments in expensive and unreliable systems result in the need to regulate to constrain energy use.

· Water – which again can be made available, but the loss of availability means regulatory systems to constrain use.

· Expensive social engineering systems – such as in child care, disability etc – all needing significant regulatory schemes to reduce leakage and waste created by poor design.

Sounds gloomy and disastrous? Not necessarily. All of these contemporary drivers are extensions of the norm for all regulatory schemes. They have always existed. Regulation is an extension of the political determination of sovereign nations and hence will always be shaped by and conform to, the ideology and political interests of the day. The complication comes in liberal democracies where more and more of peoples’ daily lives are consumed with compliance issues but peoples’ understanding of harm becomes confused. In SARS2COVID19 this confusion was exacerbated by regulation through fear and false messaging. Some countries have converted this trend into an embedded virtue-driven lifestyle through the effective integration of social credit systems for all interactions. But the history of free-market democratic systems indicates that government imposition of layers of non-independent regulation, driven by non-harm related interests, and shaped to respond to contrived regulatory problems, together cause society, accepted norms and the economy to collapse.

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