Substantive authoritative instruments
There are many types of ‘authoritative’ instruments. All involve, and rely primarily on, the ability of governments to direct or steer targets in the directions they would prefer them to go through the use of the real or perceived threat of state-enforced sanctions. While treasure resources, discussed in the next chapter, are often used to encourage ‘positive’ behaviour – that is, behaviour which is aligned with government goals – authoritative actions can be used for this purpose, but are often also used in a ‘negative’ sense, that is, to prevent or discourage types of behaviour which are incongruent with government expectations (Ajzen 1991).
The use of the coercive power of the state to achieve government goals through the control or alteration of societal (and governmental) behaviour is the essence of regulation, the most common type of governing instrument found in this category and the one most compatible with legal forms of governance. In general, all types of regulation involve the promulgation of more or less binding rules which circumscribe or alter the behaviour of particular target groups (Hood 1986a; Kiviniemi 1986). As it has been succinctly described by Barry Mitnick, this involves the ‘public administrative policing of a private activity with respect to a rule prescribed in the public interest’ (Mitnick 1978). Rules take various forms and include standards, permits, prohibition, and executive orders. Some regulations, like ones dealing with criminal behaviour, are laws and involve the police and judicial system in their enforcement. Most regulations, however, are administrative edicts created under the terms of enabling legislation and administered on a continuing basis by a government department or a specialized, quasi-judicial government agency (Rosenbloom 2007). In relatively rare cases the authority to enact, enforce or adjudicate regulations can also be delegated to NGOs in various forms of ‘voluntary’ or ‘self-regulation’.
With regulation, the government does not provide goods and service delivery ‘directly’ through the use of its organizational resources but rather allows this to occur in a controlled fashion through an intermediary – usually a private company or market enterprise, but also sometimes state-owned enterprises or, more commonly, NGOs such as churches, voluntary organizations and association, trade unions and professional bodies. Depending on how this is done, this can be compatible with either market or corporatist types of governance (Mitnick 1978; Scott 2001). Other procedural authoritative tools are also compatible with network governance.
Direct government regulation
Regulation is a fundamental technique or tool of legal governance. Although citizens may not always be aware of their presence, among other things regulations govern the price and standards of a wide variety of goods and services they consume, as well as the quality of water they drink and the air they breathe.
There are numerous definitions of regulation, but a good general one is offered by Michael Reagan (1987), who defines it as ‘a process or activity in which government requires or proscribes certain activities or behaviour on the part of individuals and institutions, mostly private but sometimes public, and does so through a continuing administrative process, generally through specially designated regulatory agencies. Thus, in this view, regulation is a prescription by the government which must be complied with by the intended targets; failure to do so usually involves a penalty, sometimes financial but also often involving incarceration and imprisonment.
This type of instrument is often referred to as ‘command and control’ regulation since it typically involves the government issuing a ‘command’ to some target group in order to ‘control’ their behaviour. ‘Control’ also sometimes refers to the need for governments to monitor and enforce target group activity in order for a ‘command’ to be effective.
This type of regulation is very common in both social and economic spheres in order to encourage ‘virtues’ and discourage ‘vices’, however those are defined at the time. Thus criminal law, for example, is a kind of regulatory activity, as are common laws and civil codes, which all countries have and which states develop and implement, usually relatively non-controversially (May 2002; Cismaru and Lavack 2007). Although much less significant in terms of the day-to-day lives of many citizens, much more attention is paid in the policy tools literature to economic regulation which affects aspects of established markets for goods and service production, and is often resisted by target companies and industries if they feel it undermines their competitive position either domestically or internationally (Baldwin and Cave 1999; Crew and Parker 2006).
It is sometimes difficult for governments to ‘command and control’ their targets if these targets resist regulatory efforts (Scholz 1991) or if government do not have the capacity or legitimacy required to enforce their orders. As a result of these difficulties other types of regulation exist in which rules are more vague and the threat of penalties may be, at best, remote. These different types of regulation are discussed below.
Law is an important tool of modern government and the very basis of legal modes of governance (Ziller 2005). Several different types of laws exist, however. These include distinctions often drawn by legal scholars between private and public law; private civil or tort law and common law; public criminal and administrative law; and hybrids such as class action suits which combine features of public and private law. These different types of law vary substantially in terms of what kinds of situations they can be applied to, by whom and to what effect (Keyes 1996; Scheb and Scheb 2005).
All of these laws can be thought of as ‘regulations’ since all involve the creation of rules governing individual behaviour (Williamson 1975; 1996; Ostrom 1986). However, in the form it is usually discussed by policy scholars, ‘regulation’ is typically thought of as a form of public law; although even then it can also involve criminal and individual or civil actions (Kerwin 1994; 1999; West 2005).
Keyes (1996) has usefully described the six types of legal instruments which can be used by governments when they wish to invoke their authority to try to direct societal behaviour (see also Brandsen et al. 2006). These are
shown in Table 6.1.
While laws can prohibit or proscribe many kinds of behaviour (and encourage others either by implication or overtly), in order to move beyond the symbolic level, they all require a strong enforcement mechanism, which includes various forms of policing and the courts (Edelman 1964; 1988). And even here a considerable amount of variation and discretion is possible since inspections and policing can be more or less onerous and more or less frequent, can be oriented towards responding to complaints or actively looking for transgressions (“police patrols” vs “fire alarms”), and can be focused on punishment of transgressions or prevention, in the latter case often with a strong educational component designed to persuade citizens and others to adopt modes of behavour more congruent with government aims and objectives (McCubbins and Schwartz 1984; Hawkins and Thomas 1989; McCubbins and Lupia 1994; May and Winter 1999). A desire for 100 per cent compliance on the part of governments requires a high level of scrutiny and thus some kind of ongoing, institutionalized, regulatory presence within a government organization or agency: typically a line department such as a police department or some other similar administrative bureau with investigatory and policing powers.
All laws are intrusive and many are highly visible. A significant problem with the use of laws in policy designs, however, pertains to cost, automaticity and precision of targeting. With respect to the first two, while passage of a law is usually not all that costly, the need for enforcement is. Laws have a low degree of automaticity as they rely upon citizen’s goodwill and perceptions of legitimacy for them to be obeyed. Inevitably this will not ensure 100 per cent compliance and will thus require the establishment of an enforcement agency, such as the police, customs agencies, immigration patrols, coastguards and the courts. Precision of targeting is also an issue since most laws have general applicability and often cannot single out specific groups or targets for differential treatment. These problems have led to the use of alternate forms of regulation expected to reduce these costs and allow for improved targeting of specific actors.
Independent regulatory commissions
Direct administrative implementation of legislative rules is very common in legal modes of governance. However, in the economic realm, especially, it often raises concerns about corruption and patronage, that is, in the abuse of administrative discretion to either ease enforcement in certain cases or administer it capriciously in others. Checks on administrative discretion usually exist through the court system, whereby those who feel they have been unfairly treated can often appeal administrative decisions and seek their overturn (Jaffe 1965; Edley 1990). This can be a very time-consuming and expensive process, however, and several distinct forms of regulatory agencies with semi-independent, quasi-judicial status have been developed in order to avoid governance problems associated with direct departmental regulation.
The most well-known of these is the independent regulatory commission or IRC used in corporatist modes of governance. Although some early exemplars of this instrument can be found in canal authorities in Great Britain and other European railway, highway and transportation regulatory authorities of the eighteenth and nineteenth centuries, the IRC as it is currently known stems mainly from concerns raised in the post-Civil War USA about unfair practices in railway transportation pricing and access. These led to the creation of an innovative organizational regulatory form in the 1887 US Pendleton Act which established the US Interstate Commerce Commission, a quasi-judicial body operating at arms length from government which was intended to act autonomously in the creation and enforcement of regulations and which remained in operation for over 100 years (until 1995) (Cushman 1941).
Independent regulatory commissions evolved from the transportation sector to become common in many other sectors, not limited to those dealing with economic issues. They are ‘semi-independent’ administrative agencies in the sense that, as was the case with public enterprises, government control is indirect, and exercised via the appointment of commissioners who are more or less difficult to remove from office (Stern 1997; Gilardi 2005b and 2005c; Jacobzone 2005; Majone 2005; Christensen and Laegreid 2007). Irene Wu has listed eleven aspects of their organization, staffing and function which makes such agencies ‘independent’ (Wu 2008) (see Table 6.2).1
IRCs are quasi-judicial in the sense that one of their main activities is adjudicating disputes over the interpretation and enforcement of rules – a task taken away from the courts in order to ensure that expertise in the specific activities regulated is brought to bear on a case in order to have more expert, timely and predictable results. Decisions of independent regulatory commissions are still subject to judicial review, although often this is only in terms of issues relating to procedural fairness, rather than the evidentiary basis of a decision (Edley 1990; Berg 2000; Laegreid et al. 2008; Lehmkuhl 2008).
IRCs are relatively inexpensive, specialized bodies that can remove a great deal of the routine regulatory burden in many areas of social and economic life from government departments, and are quite popular with governments wishing to simplify their agendas and reduce their need to supervise specific forms of social behaviour on a day-to-day basis. In the contemporary period independent regulatory commissions are involved with all aspects of market behaviour, production, distribution and consumption, as well as many areas of social life. Many specialized forms of IRCs exist, such as the use of ‘marketing boards’, or arm’s-length regulatory bodies often staffed by elected representatives of producers and granted specific rights to control prices and/or supply, thereby creating and enforcing pricing and supply regimes on producers. This has occurred primarily in areas affected by periodic bouts of over- or under-supply and can be found in areas such as bulk agricultural commodities like wheat or milk which are very sensitive to price fluctuations, but also in areas, such as liver and heart transplants, subject to chronic supply shortages (Weimer 2007; Royer 2008). These boards typically act as rationing boards charged with allocating supply quotas and setting prices in order to smooth out supply fluctuations in the activity involved.
Although it began with regulation of trade, commerce and distribution, primarily railways and transport, the IRC instrument quickly moved to production, and in the post-World War I era in many countries were implemented in areas such as labour and industrial disputes regulation, as well as the commodity-based marketing boards mentioned above. In the post-World War II era they were used to cover a range of emerging consumer and consumption issues such as consumer rights, landlord–tenant interactions, human rights disputes and others (Hodgetts 1973).
As Berg (2000) and Stern and Holder (1999) noted, in addition to questions related to their level of independence or autonomy, additional design criteria include the clarity of their roles and objectives; their degree of accountability of governments or the public; their level and type of participation and transparency; and ultimately their predictability in terms of being bound by precedents either of their own making or through judicial review (see also Berg et al. 2000).
IRCs, like more direct government regulation, have been the subject of efforts at deregulation as governments attempted to move some sectors away from legal and corporatist governance forms towards more market modes. Some high profile privatization and deregulation in transportation, telecommunication and financial industries in many countries occurred as a result of these effort (Levi-Faur 2003). The reality, however, is that there has been no across-the-board reduction in the use of more directive tools (Drezner 2001; Vogel 2001; Wheeler 2001). Like privatization, deregulation is nowhere as widespread as claimed by both enthusiasts and critics (Iacobucci et al. 2006).2 Indeed, regulations have been expanded in many sectors to compensate for the loss of state control following privatization of public enterprises (Jordana and Levi-Faur 2004; Braithwaite 2008) and IRCs are among the most favoured means of re-regulating deregulated or privatized industries and activities (Ramesh and Howlett 2006).
With respect to targeting, including precision and selectivity among groups and policy actors, the information needed to establish regulation is less than with many other tools because a government need not know in advance the subject’s preferences, as is necessary in the case of some other instruments. It can just establish a standard, for example a permitted pollution level, and expect compliance. This is also unlike the situation with financial incentives, for example, which will not elicit a favourable response from regulatees unless their intended subjects have a preference for them (Mitnick 1980).
There are still some concerns about the use of this instrument in policy designs, however, linked to considerations of cost and visibility. The cost of enforcement by regulatory commissions can be quite high depending on the availability of information, and the costs of investigation and prosecution in highly legalistic and adversarial circumstances can also be very large. Regulations also are often inflexible and do not permit the consideration of individual circumstances, and can result in decisions and outcomes not intended by the regulators (Bardach 1989; Dyerson and Mueller 1993). They quite often distort voluntary or private sector activities and can promote economic inefficiencies. Price regulations and direct allocation, for example, restrict the operation of the forces of demand and supply and affect the price mechanism, thus causing sometimes unpredictable economic distortions in the market. Restrictions on entry to and exit from industrial sectors, for example, can reduce competition and thus have a negative impact on prices. Regulations can also inhibit innovation and technological progress because of the market security they afford existing firms and the limited opportunities for experimentation they might permit. For these and other reasons, they are often labelled as overly intrusive by many firms and actors.
Indirect government regulation
A third form of regulation is ‘indirect regulation’ which is very compatible with corporatist modes of governance. There are several different types of such regulation, however, which vary in terms of their design attributes.
Delegated professional regulation
This is a relatively rare form of regulatory activity which occurs when a government transfers its authority to licence certain practices and discipline transgressors to non-governmental or quasi-governmental bodies whose boards of directors, unlike the situation with independent regulatory commissions, they typically do not appoint (Elgie 2006; Kuhlmann and Allsop 2008). Delegated regulation typically involves legislatures passing special legislation empowering specific groups to define their own membership and regulate their own behaviour. Brockman (1998) defines it as:
the delegation of government regulatory functions to a quasi-pubic bodythat is officially expected to prevent or reduce both incompetence (lack of skill, knowledge or ability) and misconduct (criminal, quasi-criminal or unethical behaviour) by controlling the quality of service to the public through regulating or governing activities such as licencing or registration – often involving a disciplinary system (fines, licences, suspension or revocation) and codes of conduct/ethics, etc.
This occurs most commonly in the area of professional regulation where many governments allow professions such as doctors, lawyers, accountants, engineers, teachers, urban planners and others to control entrance to their profession and to enforce professional standards of conduct through the grant of a licencing monopoly to an organization such as a bar association, a college of physicians and surgeons, or a teachers’ college (Tuohy and Wolfson 1978; Trebilcock et al. 1979; Tuohy 1992; 1999; Sinclair 1997). Typically, appeals of the decisions of delegated bodies may also be heard by the courts or specialized administrative tribunals (Trebilock 2008).
The idea behind delegated regulation, as with independent regulatory commissions, is that direct regulation through government departments and the courts is too expensive and time-consuming to justify the effort involved and the results achieved. Rather than tie up administrators and judges with many thousands of cases resulting from, for example, professional licencing or judicial or medical malpractice, these activities can be delegated to bodies composed of representatives of the professional field involved who are the ones most knowledgeable about best practices and requirements in the field. Governments have neither the time nor expertise required to regulate multiple interactions between lawyers and their clients, teachers and students, or doctors and patients, and a form of ‘self-regulation’ is more practical and cost efficient.
Scandal in areas such as business accounting in many countries in recent years, however, can undermine confidence in a profession’s ability or even willingness to police itself, and can lead to a crisis in confidence in many aspects of delegated self-regulation (Vogel 2005; Bernstein and Cashore 2007; Tallontire 2007). Of course, any delegation of government regulatory authority can be revoked if misbehaviour ensues.
Voluntary or incentive regulation
Another form of indirect or ‘self-regulation’ has a more recent history than delegated regulation and has been extended to many more areas of social and economic life. This is typically a form found in market governance systems in which, rather than establish an agency with the authority to unilaterally direct targets to follow some course of action with the ability to sanction those actors who fail to comply, instead a government tries to persuade targets to voluntarily adopt or conform to government aims and objectives.
Although these efforts often exist ‘under the shadow of hierarchy’ (Heritier and Lehmkuhl 2008) – that is, where a real threat of enhanced oversight exists should voluntary means prove insufficient to motivate actors to alter their behaviour in the desired fashion – they also exist in realms where hierarchies don’t exist, such as the international realm when a strong treaty regime, for example, cannot be agreed upon (Dimitrov 2002; 2005; 2007). A major advantage often cited for the use of voluntary standard-setting is cost savings, since governments do not have to pay for the creation, administration, enforcement and renewal of such standards, as would be the case with traditional command and control regulation whether implemented by departments or independent regulatory commissions. Such programmes can also be effective in international settings, where establishment of effective legally based governmental regimes can be especially difficult (Schlager 1999; Elliott and Schlaepfer 2001; Cashore et al. 2003; Borraz 2007).
Moffet and Bregha set out the main types of voluntary regulation (see Table 6.3) found in areas such as environmental protection.
These tools attempt such activities as inducing companies to exceed pollution targets by excluding them from other regulations or enforcement actions; establishing covenants in which companies agree to voluntarily abide by certain standards; establishing labelling provisions or fair trade programmes; providing favourable publicity and treatment for actors exceeding existing standards; promoting co-operation over new innovations; and attempting to improve standards attainment by targeted actors through better auditing and evaluation. These are all forms of what Sappington (1994) has termed ‘incentive regulaton’.
The role played by governments in voluntary regulation is much less explicit than in traditional regulation, but is nevertheless present. Unlike the situation with command and control or delegated regulation, in these instances governments allow non-governmental actors to regulate themselves without creating specific oversight or monitoring bodies or agencies or empowering legislation. As Gibson (1999: 3) defined it:
By definition voluntary initiatives are not driven by regulatory requirements.They are voluntary in the sense that governments do not have toorder them to be undertaken . . . [but] governments play important rolesas initiators, signatories, or behind-the-scenes promoters.
While many standards are invoked by government command and control regulation, others can be developed in the private sphere, such as occurs in situations where manufacturing companies develop standards for products or where independent certification firms or associations guarantee that certain standards have been met in various kinds of private practices (Gunningham and Rees 1997; Andrews 1998; Iannuzzi 2001; Cashore 2002; Eden 2009; Eden and Bear 2010).
These kinds of self-regulation, however, are often portrayed as being more ‘voluntary’ than is actually the case. That is, while non-governmental entities may, in effect, regulate themselves, they typically do so, as Gibson notes, with the implicit or explicit permission of governments, which consciously refrain from regulating activities in a more directly coercive fashion (Gibson 1999; Ronit 2001). As long as these private standards are not replaced by government enforced ones, they represent the acquiescence of a government to the private rules, a form of delegated regulation (Haufler 2000; 2001; Knill 2001; Heritier and Eckert 2008; Heritier and Lehmkuhl 2008).
As a ‘public’ policy instrument, self-regulation still requires some level of state action – either in supporting or encouraging development of private selfregulation or retaining the ‘iron fist’ or the threat of ‘real’ regulation if private behaviour does not change (Cutler et al. 1999; Gibson 1999; Cashore 2002; Porter and Ronit 2006). This is done both in order to ensure that self-regulation meets public objectives and expectations (see for example, Hoek and King’s (2008) analysis of the ineffective self-regulation practiced by TV advertisers in New Zealand) and to control the kinds of ‘club’ status which self-regulation can give to firms and organizations which agree to adhere to ‘voluntary’ standards (Potoski and Prakesh 2009). Certification schemes, for example, can closely approximate cartel-like arrangements which allow premiums to accrue to club members rather than to the public. As Delmas and Terlaak (2001) noted, joining or participating in voluntary schemes entails both costs and benefits to companies, which undertake detailed cost–benefit calculations about whether or not to join voluntary associations. This is one of the ‘limits of virtue’ which David Vogel (2005) noted in his studies of various corporate social responsibility (CSR) schemes in the late 1990s and first decade of the twenty-first century (see also Tallontire 2007 and Natural Resources Canada 2003).
It is also the case that any possible savings in administrative costs over more direct forms of legal regulation must be balanced against additional costs to society which might result from ineffective or inefficient administration of voluntary standards, especially those related to non-compliance (Gibson 1999; Karamanos 2001; Henriques and Sadorsky 2008).
Market creation and maintenance
Paradoxically as it might seem from its title, another form of indirect regulatory instrument used by government is the use of co-called ‘market-based’ instruments (Hula 1988; Fligstein 1996). These refer to a particular type of regulatory tool in which governments establish property rights frameworks or regimes which establish various kinds of limits or prices for certain goods and services and then allow market actors to work within these ‘markets’ to allocate goods and services according to price signals (Averch 1990; Cantor et al. 1992).
Such schemes have often been proposed mostly in the area of environmental and resource policy, from land and water use (Murphy et al. 2009) and bio-conservation (ecosystem services) (Wissel and Watzold 2009), but have also been used in the fisheries, such as individual tranferable quotas (ITQs) (Pearse 1980; Townsend et al. 2006), and with respect to the control of greenhouse gas regulation, such as the ‘cap and trade’ systems created in the European Union and other countries associated with the Kyoto Protocol and climate change mitigation efforts (Heinmiller 2007; Voss 2007; Hahn 2008; Toke 2008; Pope and Owen 2009).
However, few of these schemes have been implemented given the difficulties of setting prices and limits on items such as pollutants, problems with leakage and poor enforcement in the system and dangers associated with market failures, as well as the inability of governments to bear the blame for problems with these systems, despite their ostensibly arm’s length character (Stavins 1998; 2001; Mendes and Santos 2008; Keohane et al. 2009). Unlike traditional regulation, these designs can be higher cost and less automatic than expected, and also are very difficult, if not impossible, to target towards specific actors and groups (Krysiak and Schweitzer 2010).