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Materiale didattico per il corso di Theories of Regulation della prof.ssa Laura Ammannati. Trattasi dell'articolo di Robert Balwin e Julia Black dal titolo "Really Responsive Regulation" riguardante il modello della Really Responsive Regulation come aggiornamento delle teorie dell'enforcement.

Esame di Theories of Regulation docente Prof. L. Ammannati

Anteprima

ESTRATTO DOCUMENTO

15/2007

regulatee, but in five further ways: to the firms’ own operating and cognitive

frameworks (their ‘attitudinal settings’); to the broader institutional environment

of the regulatory regime; to the different logics of regulatory tools and strategies;

to the regime’s own performance; and finally to changes in each of these elements.

Such a really responsive approach, we contend further, must be applied right

across the range of activities` that make up the regulatory process. In presenting

our argument, accordingly, we analyse the full range of tasks involved in regulatory

enforcement processes (including detection and assessment) and use recent

empirical work carried out for the UK Department for the Environment, Food

and Rural Affairs (Defra) to illustrate the challenges involved in discharging these

various tasks. We suggest that regulation should be sensitive to the interactions

15

and trade offs that are involved in meetings these often quite distinct challenges,

and argue that it is only such sensitivity that makes regulation ‘really responsive’.

Before looking in more detail at the ‘really responsive regulation’ approach, it

is worth setting the scene by reviewing the development of mainstream

approaches to regulatory enforcement. The next section, accordingly, looks at the

ways in which ‘responsive regulation’ moved the debate (and practical strategies)

onwards from disputes about ‘compliance versus deterrence’ approaches. It

considers the advent of ‘smart’ regulation, the currently fashionable ‘risk-based’

solution to regulatory challenges, and the contribution of the ‘problem solving’

method of organising regulatory activities. Such approaches to regulation bring

fresh insights into the regulatory game but they also bring new challenges to the

fore. ‘Smart’ and ‘risk-based’ strategies, for instance, raise difficulties of

transparency, accountability, evaluation and modification that are yet to be fully

explored.

The second section examines the challenges that remain, in spite of the

advances made in these literatures. It delineates in more detail the key elements of

responsiveness that we argue regulation has to exhibit in all aspects of regulatory

activity. The third section then examines the particular context of inspection and

enforcement, analysing the inspection and enforcement process as the interlinkage

of five different tasks. Each of these tasks involves a particular set of challenges

that is accompanied by its own group of potential solutions or approaches. These

are discussed individually, and illustrated by recent empirical work in the UK

environmental and fisheries sectors. We conclude by summarising the value that is

added by looking at enforcement through a really responsive regulation lens and

The research was conducted at Defra’s request between August – November 2005. It looked at

15

enforcement in seven Defra areas: Environmental Impact Assessments (Uncultivated Land); Cattle

Identification Scheme; Horticulture (classification of imported fruit and vegetables); Pesticides Safety;

Waste Management (Fly-Tipping); Fisheries and Ozone. Its aim was to analyse the use of different

enforcement tools and to suggest ways of improving enforcement effectiveness by moving towards best

practice methods across Defra. Fifty structured and unstructured interviews were conducted with Defra

staff across the above seven areas of activity - interviewees included policymakers as well as lawyers and

field enforcers. The draft findings and proposals were subjected to feedback evaluation at Defra review

meetings and through presentation at a Defra interdepartmental workshop. 4

Robert Baldwin and Julia Black Really Responsive Regulation

consider the potential concern that this may be a level of regulatory analysis that

goes too far to be operationalised within realistic resource and time constraints.

THE DEVELOPMENT OF APPROACHES TO ENFORCEMENT

R

R ESPONSIVE EGULATION

One of the great contributions of Ayres and Braithwaite’s 1992 book Responsive

Regulation was its condemning as ‘sterile’ the long history of disputation between

proponents of ‘deterrence’ and ‘compliance’ models of regulatory enforcement;

“between those who think that corporations will comply with the law only when

confronted with tough sanctions and those who believe that gentle persuasion

works in securing business compliance with the law.” It was time, they said, to

16

move away from such “crude polarisation” and to strike “some sort of

sophisticated balance between the two systems.” The crucial question for Ayres

17

and Braithwaite was: ‘When to punish; when to persuade?’ Their prescription was

a ‘tit for tat’ or responsive approach in which regulators enforce in the first

instance by compliance strategies, but apply more punitive deterrent responses

when the regulated firm fails to behave as desired. Compliance, they suggested,

was more likely when a regulatory agency displays an explicit enforcement pyramid

– a range of enforcement sanctions extending from persuasion, at its base, through

warning and civil penalties up to criminal penalties, licence suspensions and then

licence revocations. Regulatory approaches would begin at the bottom of the

18

pyramid and escalate in response to compliance failures. There would be a

presumption that regulation should always start at the base of the pyramid.

The pyramid of sanctions is aimed at the single regulated firm, but Ayres and

Braithwaite also apply a parallel approach to entire industries. Thus they propose a

for regulating different areas of social or

‘pyramid of regulatory strategies’ 19

economic activity. Governments should seek, and offer, self-regulatory solutions

to industries in the first instance but that, if appropriate goals are not met, the

state should escalate its approach and move on through enforced self regulation to

command regulation with discretionary punishment and finally to command

regulation with non-discretionary punishment.

It has widely been acknowledged that the enforcement pyramid and the tit-

for-tat approach have offered a considerable advance on blanket commitments to

deterrence and compliance models. Responsive regulation remains hugely

influential worldwide and is applied by a host of governments and regulators. It

has been further elaborated both by John Braithwaite and by the recent empirical

n 14 above, 20. See also Sparrow, n 13 above, 184.

16 n 14 above, 21.

17 ibid 35.

18 ibid 38-9.

19 5

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work on the Australian Tax Office’s Compliance Model led by Valerie

Braithwaite. Indeed, Braithwaite has expanded the notion of ‘responsive

20

regulation’ well beyond its original context of enforcement into an all-

encompassing regulatory and democractic ideal, incorporating notions of

deliberative democracy and restorative justice. We will return to the more

21

expansive formulations of ‘responsiveness’ below; we are concerned in this section

with the original formulation of responsive regulation, as subsequently elaborated

in the enforcement context. As elaborated, responsive regulation has three critical

elements to its implementation: first, a systematic, fairly directed and fully

explained disapproval, combined with, second, a respect for regulatees; and third,

an escalation of intensity of regulatory response in the absence of a genuine effort

by the regulatee to meet the required standards. This latter element, and in

22

particular the pyramidic regulatory strategy of enforcement, has however been the

subject of a number of criticisms or reservations. 23

These criticisms fall mainly into three groups: the policy or conceptual; the

practical, and the constitutional. In policy terms, the first criticism of the pyramid

approach is that in some circumstances step by step escalation up the pyramid may

not be appropriate. For example, where potentially catastrophic risks are being

controlled it may not be feasible to enforce by escalating up the layers of the

pyramid and the appropriate reaction may be immediate resort to the higher

levels. 24

Secondly, the regulator is meant to move up and down the pyramid

depending on whether the regulatee cooperates or not. Escalation and descalation

is thus possible throughout the course of the relationship with a firm, and indeed

possibly within the same regulatory encounter. But moving down the pyramid,

may not always be easy, as Ayres and Braithwaite recognise, because use of more

punitive sanctions can prejudice the relationships between regulators and regulates

that are the foundations for the less punitive strategies. Moreover, the constant

25

threat of more punitive sanctions at the top can make ‘voluntary’ compliance at

the bottom of the pyramid impossible.

J. Braithwaite, Responsive Regulation and Restorative Justice (Oxford: Oxford University Press, 2002); V.

20

Braithwaite (ed), Special Issue on Responsive Regulation and Taxation (2007) 29(1) Law and Policy.

Braithwaite, Responsive Regulation and Restorative Justice, ibid; J. Braithwaite, ‘Responsive Regulation and

21

Developing Economies’ (2006) 34(5) World Development 884.

Braithwaite, Responsive Regulation and Restorative Justice, n 20 above.

22 For critiques of responsive regulation see e.g. N. Gunningham and P. Grabosky, Smart Regulation

23

(Oxford: Clarendon Press, 1998); J. Mendeloff, ‘Overcoming Barriers to Better Regulation’ (1993) 18 Law

and Social Inquiry 711; R. Johnstone, ‘Putting the Regulated Back into Regulation’ (1999) 26 J. of Law and

Society 378; and the book reviews of Responsive Regulation at: (1993) 106 Harvard Law Review 1685

(Editorial); (1993) 98 American Journal of Sociology 1187 (Anne Khademian); (1993) 87 American Political

Science Review 782 (John Scholz); (1993) 22 Contemporary Sociology 338 (Joel Rogers).

Though see the argument that, where possible, persuasion should be the strategy of first choice

24

because preserving the perception of fairness is important to nurturing voluntary compliance – discussed

by K Murphy, ‘Moving Towards a More Effective Model of Regulatory Enforcement in the Australian

Tax Office’ (2004) British Tax Review 603-19.

See n 14 above, Chapter 2; F. Haines, Corporate Regulation: Beyond Punish or Persuade (Oxford: Oxford

25

University Press, 1997) 219; Johnstone, n 23 above. 6

Robert Baldwin and Julia Black Really Responsive Regulation

Thirdly, it may be wasteful to operate an escalating tit for tat strategy across

the board. Responsive regulation presupposes that regulatees do in fact respond to

the pressures imposed by regulators through the sanctioning pyramid. However

corporate behaviour is often driven not by regulatory pressure but the culture

prevailing in the sector or by the far more pressing forces of competition. Some

authors have specified this more closely in terms of the motivations or character

of non-compliance. These approaches (which we term ‘target-analytic’) suggest

26

that in some situations it may be more efficient to analyse types of regulated firms

and to tailor and target types of regulatory response accordingly. If, for example,

research reveals that a particular problem is predominately being caused by firms

that are ill-disposed to respond to advice; education and persuasion, the optimal

regulatory response will not be to start at the base of the enforcement pyramid – it

will demand early intervention at a higher level. Whenever a group of regulatees is

irrational or unresponsive to tit for tat approaches, the latter will tend to prove

wasteful of resources. Similarly, an analysis of risk levels may militate in favour of

early resort to higher levels of intervention (even where risks are non-

catastrophic). The thrust of this argument is that, at least where the costs of

analysis are low, it will be more efficient to ‘target’ responses than to proceed

generally on a responsive regulation basis.

The pyramid approach and target-analytic approach can be integrated, but

only with some modification of the former. Indeed in a move which breaks

fundamentally with the game-theory roots of the ‘tit for tat’ strategy and its

underlying assumption of a rational actor, Braithwaite has subsequently recognised

different types of motivational postures suggested different strategies are

appropriate for different types of firm. The starting point should still be

negotiation. However, escalation should depend on an assessment of the firm’s

motivational stance and regulatory capacity. ‘Virtuous’ firms should receive

negotiating, restorative justice strategies; ‘rational’ firms should be met with

deterrence strategies, and incompetent and irrational actors should be simply

incapacitated, eg have their licences revoked. 27

For example, Kagan and Scholz point to three types of firm – R. Kagan and J. Scholz, ‘The

26

Criminology of the Corporation’ in K. Hawkins and J. Thomas (eds.) Enforcing Regulation (Boston: Kluwer,

1984). Empirical work has questioned the validity of the distinctiveness of these reasons for non-

compliance, however: V. Braithwaite, J. Braithwaite, D. Gibson and T. Makkai, ‘Regulatory Styles,

Motivational Postures and Nursing Home Compliance’ (1994) 16 Law and Policy 363; see also V.

Braithwaite (ed), Taxing Democracy: Understanding Tax Avoidance and Evasion (Aldershot: Ashgate, 2003). For

other classifications see e.g. R. Baldwin, ‘Why Rules Don’t Work’ (1990) 53 MLR 321. The UK tax

regulator, HM Customs and Excise, has come up with a further classification, identifying seven types of

responses on a compliance continuum, and the appropriate regulatory strategy in each case: HM Customs

and Excise Annual Report 2003-4, HC 119 (London: HMSO, 2003) 123.

On combining targeting and responsive approaches see Braithwaite, Responsive Regulation and Restorative

27

Justice, n 20 above, 36-40, reiterated in J. Braithwaite, ‘Rewards and Regulation’ (2002) Jnl Law and Society

12, 21-22 and J. Braithwaite, ‘Responsive Regulation and Developing Economies’, n 21 above, 887-8. 7

15/2007

Fourthly, responsive regulation approaches look most convincing when a

binary regulator-regulatee relationship is assumed. Such a scenario envisages the

28

transmission of clear messages from regulator to regulatee. As Parker has

suggested, it involves the creation ‘enforcement communities’ in which regulator

and regulatee understand the strategy that each is adopting and can predict each

other’s responses. Such understanding may not develop, however, even in a

29

binary relationship. The relationship between the regulatee and the rest of the

regulatory regime may not consist only of a relationship with one regulator in any

particular area of activity. Regulatory regimes can be highly complex, and

inspection and enforcement activities can be spread across different regulators

with respect to similar activities or regulations. For example, our 2005 study of

Defra’s inspection and enforcement revealed that there were numerous areas in

which enforcement responsibilities are spread across different regulators, including

fly-tipping (Defra, Local Authorities, police); cattle identification (State Veterinary

Service (SVS), Rural Payments Agency, Local Authorities); Transmissible

Spongiform Encephalopathy Regulations (SVS, Local Authorities, Defra, Food

Standards Agency). As a result, responsive regulation may prove weak because the

messages flowing between regulators and regulatees are confused or subject to

interference. This may happen because regulatees are uncertain about who is

demanding what and which regulator needs to be listened to regarding a particular

issue. Such regulatory ‘white noise’ may undermine the responsive regulation

strategy because lack of clear messaging will detract from the impact of any

responsive approach to sanctioning.

There can also be practical limitations on the operation of the pyramid in

practice. Escalating through the layers of the pyramid may simply not happen,

again because enforcement is not simply a two-actor game in which the only factor

that shapes the enforcer’s response is the co-operative or unco-operativeness of

the regulatee. Indeed, as Mendeloff has argued, whether a responsive approach is

optimal will depend on a number of other factors such as agency resource levels,

the size of the regulated population, the kinds of standards imposed (and how

these are received), the observability of non-compliance, the costs of compliance,

the financial assistance available for compliance and the penalty structure. 30

Enforcers may prove excessively tied to compliance approaches for a number of

reasons, including their own organisational resources, culture and practices and the

constraints of the broader institutional environment. The agency may lack the

tools or resources to progress to more punitive strategies; it may fear the political

consequences of progression and may not have the judicial , public or political

31

Responsive regulation, in Ayres and Braithwaite’s original formulation, does also envisage the

28

involvement of consumers in a tri-partite arrangement; however the assumption is that the relationship is

otherwise between a firm and a regulator and does not envisage multiple regulators.

C. Parker, ‘Compliance professionalism and regulatory community: The Australian trade practices

29

regime’ (1999) 26(2) Journal of Law & Society 215.

See Mendeloff, n 23 above, 717.

30 On under-deterrence from low fines see e.g. the complaints of the Environment Agency in Annual

31

Report 2004, and the comments in the Hampton and Macrory Reports: P. Hampton, Reducing

8

Robert Baldwin and Julia Black Really Responsive Regulation

support for escalation; it may be reluctant to trigger an adverse business reaction

to deterrence strategies; it may find it difficult to assess the need for escalation

because it lacks the necessary information on the exact nature of a regulated firm’s

response to existing controls; and it may be disinclined to escalate unless it has

sufficient evidence to make a case for the highest level of response (e.g. to

prosecute or disqualify). Alternatively, those at the top of the regulatory

32

organisation may have made a strategic decision to ‘come down hard’ on particular

types of offence or offender for a range of reasons – media or political pressure,

for example, or as a more general shift to a more ‘deterrence’ or punitive style

across the board or with respect to particular regulatees, or to compensate for

33

weaknesses in other inspection and enforcement strategies adopted by the

regulator. Such enforcement strategies are being adopted by UK regulators, for

example the Financial Services Authority, to complement their risk based

approaches to inspection and supervision. In this situation, regulatory policy

overrides the individual nature of the regulator-regulatee relationship. It does not

matter how cooperative the regulatee is, the regulatory official is meant to adopt a

more punitive stance in order to pursue wider organisational objectives. In

There may also be legal problems in applying a responsive approach. 34

some areas, legislatures may have decreed that defaulters shall be met with, say,

deterrence strategies and this may tie the hands of the enforcing agency. 35

Responsive regulation, moreover, calls for the availability of a wide range of

credible sanctions, but legislators may have failed to provide regulators with the

sanctions and investigative tools that allow a progression up the pyramid. The

recent Macrory review of penalties, for example, highlighted many areas where

regulators possessed no big stick that allowed them to ‘speak softly’ whilst having

a credible threat in the background. Although regulators commonly possess

36

prosecution powers, the fines imposed by the courts are often so low that they fail

to provide deterrence to the more calculating offenders, particularly small,

itinerant operators who have few reputational concerns. Alternatively, the stick

37

may be so big (involving, for instance, the revocation of a major utility’s licence, or

Administrative Burdens (London, HM Treasury, 2005) (hereafter Hampton Report); and R. Macrory,

Regulatory Justice: Sanctioning in a post-Hampton World (Cabinet Office, May 2006) (hereafter Macrory

Report); and NAO Report, at [2.34]-[2.36].

The NAO Report, at [2.27] stated that fisheries infringements would be dealt with by means of written

32

warnings in some cases but only if ‘ the same evidence would be likely to stand scrutiny successfully if it

were presented to a court’.

Eg J. Black, ‘Managing Regulatory Risks and Defining the Parameters of Blame: the Case of the

33

Australian Prudential Regulation Authority’ (2006) 28(1) Law and Policy 1; R. Baldwin, ‘The New Punitive

Regulation’ [2006] Public Law 351.

On responsive regulation and legality see J. Freigang, ‘Is Responsive Regulation Compatible With the

34

Rule of Law?’ (2002) 8 European Public Law 463.

For example the US Federal Deposit Insurance Corporation Improvement Act contains a provision for

35

prompt corrective action. This stipulates the different types of action the Federal Deposit Insurance

Corporation should take when capital levels in a deposit taking institution reach particular levels.

See n 14 above, Chapter 2.

36 Macrory Report; see also Hampton Report.

37 9

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the de-recognition of a political party) that it simply can never be used. The

potential sanction may be so severe that even threats to use it are not credible.

Responsive regulatory strategies have also been criticised on the grounds of

fairness, proportionality and consistency. Although responsive strategies can

uphold principles of substantive rationality, they inevitably come up against

criticisms of lack of formalism and as undermining both the rule of law and

broader constitutional values. Yeung, for example, argues that the ‘relentless

38

quest for effective compliance’ that pervades Ayres and Braithwaite’s model

prioritises the functional concerns of ensuring effective regulation over

constitutional values of proportionality and consistency. Regulatory responses are

dictated by the cooperation or non-cooperation of the regulatee, not the

seriousness of the infraction. Infractions causing widespread harm will not be

treated severely so long as the regulatee cooperates with the regulator, whereas

minor infractions will be treated severely if the regulatee does not cooperate. The

enforcement response is thus not proportional to the harm cause, and this is said

to raise issues of consistency of treatment across different regulatees. Such issues

39

can be addressed to an extent by the generation of rules and guidelines to confine,

structure and check responsive strategies, but there are dangers that such

structuring may straitjacket responsive regulation within costly bureaucratic

controls and that the structuring guidelines used may give effect to important

policies that are likely to be under-exposed to democratic scrutiny. Further, such

40

‘collaborative compliance’ regimes, characterised by close relationships between

Ayres and Braithwaite’s

regulator and regulate, are prone to ‘regulatory capture’. 41

answer here is to advocate a system of tripartism – in which Public Interest

Groups (PIGs) are legally empowered parties within the regulatory process that

can act as informed representatives of regulatory beneficiaries and operate as

counterbalances to industrial and agency pressures. Critics have, however,

42

questioned how such a system can be made to work within responsive regulation

that

and have cautioned that empowered PIGs may become ‘shadow regulators’; 43

disputes about the representativeness of empowered PIGs can be expected; that

gridlocks may result; and that regulatory processes will not be constructively

underpinned by trust and cooperation where there is (as in the USA) a backdrop

of adversarial legalism. 44

See e.g. K. Wehran, ‘De-Legalizing Administrative Law’ (1996) University of Illinois LR 423.

38 K. Yeung, Securing Compliance: A Principled Approach (Oxford: Hart Publishing, 2004) 168-170.

39 See J. Black, Rules and Regulators (Oxford: Oxford University Press, 1997).

40 n 39 above, 170-174; D. Dana, ‘The Emerging Regulatory Contract Paradigm in Environmental

41

Regulation’ (2000) University of Illinois LR 35; M. Seidenfeld, ‘Empowering Stakeholders: Limits on

Collaboration as a Basis for Flexible Regulation’ (2000) 72 William and Mary LR 411.

See n 14 above, Chapter 3.

42 See Mendeloff, n 23 above, 719.

43 See Scholz, n 23 above, 783; Mendeloff, ibid 720, 729.

44 10

Robert Baldwin and Julia Black Really Responsive Regulation

R L R R – S

ESPONDING TO THE IMITATIONS OF ESPONSIVE EGULATION MART

R

EGULATION

Responsive regulation does not provide a complete answer to the problems of

designing tools for regulation or of applying tools in different combinations, nor

was it intended to. As Gunningham, Grabosky and Sinclair noted in their ‘smart’

regulatory pyramid, there may be arguments for not confining the regulatory

45

response to escalating punitive responses but for thinking laterally and breaking

away from the punitive pyramid – for instance by placing more emphasis on ex

ante controls such as screening, considering whether a restructuring of the industry

will produce desired results better than regulation or whether resort to non-state

controls will work better than state sanctioning or whether it is necessary to look

beyond individual non- compliers to systemic difficulties in the sector. The

46

smart regulatory pyramid is also three-sided in making the point that different

sorts of controls can be imposed by the state but also by quasi-regulators ( such as

trade associations and professions) and by corporations. Gunningham and Sinclair

argue: “our pyramid conceives of the possibility of regulation using a number of

different instruments implemented by a number of parties. It conceives of

escalation to higher levels of coerciveness not only within a single instrument but

also across several instruments.” Braithwaite has expanded again on his own

47

original model in a similar vein to argue that a responsive approach to developing

and using regulatory tools which conceives non-state actors as important

regulators in their own right can enhance the regulatory capacity of the state. 48

The posited advantages of smart regulation’s three-sided pyramid are that it

paves the way to a coordinated approach to regulation in which it is possible to

escalate responses to non-compliance by moving not only up a single face of the

pyramid but also from one face of the pyramid to another (e.g. from a state

control to a corporate control or industry association instrument). This gives

flexibility of response and allows sanctioning gaps to be filled – so that if

escalation up the state system is not possible (e.g. because a legal penalty is not

provided or is inadequate) resort can be made to another form of influence. 49

Seeing regulation in terms of these three dimensions allows creative mixes, or

networks, of regulatory enforcement instruments and of influencing actors or

institutions to be adopted. It also encompasses the use of control instruments that,

in certain contexts, may be easier to apply, less costly and more influential than

state controls.

See Gunningham and Grabosky, n 23 above, Chapter 6; see also n 14 above, 38-9.

45 See Johnstone, n 23 above, 383.

46 ibid 399-400.

47 Braithwaite, ‘Responsive Regulation and Developing Economies’, n 21 above,; on strategies for

48

enhancing capacity by enrolling other actors see also J. Braithwaite and P. Drahos, Global Business

Regulation (Oxford: Oxford University Press, 2001) and J. Black, ‘Enrolling Actors in Regulatory

Processes: Examples from UK Financial Services Regulation’ [2003] Public Law 62-90.

Gunningham and Grabosky, n 23 above, 403.

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Smart regulation is, accordingly more holistic than responsive regulation in its

basic, enforcement, form. It nevertheless involves an escalation process and, as a

50

result, runs up against many of the general difficulties that responsive regulation

encounters and which were noted above. In addition, of course, the creation of

regulatory networks and the processes of coordinating responses across three

different systems, or faces of the pyramid, involves its own problems (an

important contribution of ‘smart regulation’ is its discussion of inherent

complementarities and incompatibilities between different regulatory

instruments). As the advocates of this approach acknowledge, such

51 52

coordination is not always easy and gives rise to special difficulties of information

management, resource and time constraints and political differences between

different institutional actors. Evaluating the case for an escalatory response

presents challenges within the responsive regulation pyramid but such evaluations

will be all the more difficult when complex mixes of strategy and institutions are

involved. Concerns about consistency, fairness and accountability may, moreover,

be even more acute than was the case with responsive regulation. 53

B R

R

ISK ASED EGULATION

As a leading influence at the central governmental level, responsive regulation has

perhaps given way (at least in the UK) to the currently fashionable ‘risk based’

regulation. In the U.K in March 2005 the Hampton Review recommended that

54

all regulatory agencies should adopt a risk based approach to enforcement and a

The principal sense in

host of agencies are actively developing such systems. 55

which the term ‘risk based’ regulation is used post Hampton is to refer to a

targeting of inspection and enforcement resources that is based on an assessment

of the risks that a regulated person or firm poses to the regulator’s objectives. The

key components of the approach are evaluations of the risk of non-compliance

and calculations regarding the impact that the non-compliance will have on the

regulatory body’s ability to achieve its objectives. Risk based regulation thus offers

an evidence-based means of targeting the use of resources. It differs from

‘pyramidic’ approaches by emphasising analysis and targeting rather than a process

of responsive escalation. As such, risk based approaches are associated with a

number of particular strengths. They provide a systematic framework that allows

The architects of responsive regulation might argue, however, that there is no inconsistency between

50

the responsive and the smart approaches. John Braithwaite, indeed (in ‘Responsive Regulation and

Developing Economies’ n 21 above, 888) has emphasised that responsive regulation conceives of NGOs

and businesses as important regulators in their own right so that : ‘…the weaknesses of a state regulator

may be compensated by the strengths of NGOs or business regulators’(892).

Gunningham and Grabosky, n 23 above, Chapter 6 (by Gunningham and Sinclair).

51 ibid 402-4.

52 See Braithwaite, ‘Responsive Regulation and Developing Economies’, n 21 above.

53 Hampton Report.

54 Black, n 12 above; on the development of similar system by the Australian Tax Office see J.

55

Braithwaite, ‘Meta-Risk Management and Responsive Regulation for Tax System Integrity’ (2003) 25 (1)

Law and Policy 1. 12

Robert Baldwin and Julia Black Really Responsive Regulation

regulators to relate their enforcement activities to the achievement of objectives.

They enable resources to be targeted in a manner that prioritises highest risks, and

they provide a basis for evaluating new regulatory challenges and new risks.

The debate on risk based regulation is focused primarily on inspection. It is

meant to apply to both proactive and reactive enforcement strategies. The

enforcement activities of some regulators, notably utilities regulators, are

principally reactive: triggered by complaints or reported incidents. The advantage

of enforcing reactively is that private citizens often bear the burden of detection

work, and this reduces public budgetary needs. Another is that the regulator is

seen to be responsive to public concerns. Core disadvantages are that the drivers

of action may be short term random and irrational considerations; attention is not

necessarily paid to the most important risks; and preventative control is not

established. Many regulators operate a proactive inspection strategy. The idea of

risk based regulation is to target both proactive and reactive strategies in

accordance with the risks a firm poses to the regulators’ objectives. As such it

stands in contrast to routine, random or regional approaches to inspections. Thus

in the area of VAT, inspectors used routinely to visit premises, regardless of

whether there had been any incidence of non-compliance in the past, or regardless

of size and so on. Under the new risk based system, firms are risk-rated in

accordance with their propensity for, and impact of, non-compliance. 56

Risk based approaches, however, give rise to a number of particular

challenges and difficulties. Risk based regulation means focusing resources on

57

regulatory priorities; the flip side is that it means not doing things that were done

before. In the first instance, therefore, risk based systems require that senior

regulatory managers are clear about which risks will not be prioritised. These

decisions may well have been made by the regulator previously: resource and other

limitations on regulatory capacity mean that regulators have always had to

prioritise. Such decisions have previously been implicit and non-transparent. Risk

based systems require them to be made explicit. As a result, managers must be

able and prepared to deal with the political and practical consequences of

establishing particular levels of risk tolerance. They must be willing to justify such

levels of tolerance both politically and legally. The targeting approach of risk based

systems may thus detract from the reassurance that the public derives from across

the board mechanisms – from having a regulatory ‘bobby on the beat.’ Risk based

systems also raise issues of consistency of treatment of regulated firms, and

equality of protection of consumers and the public. For these and other reasons,

politicians and the public may not support the regulatory body’s decisions

regarding the risks that it will prioritise for attention and those that it will not.

Risk based systems, moreover, tend to focus on known and familiar risks.

They can fail to pick up new developing risks and will tend to be backward

looking and ‘locked in’ to an established analytic framework. Another problem

See HM Customs and Excise Annual Report 2003-4, HC 119 (London: HMSO, 2003), 123-134 for the

56

initial outline of this strategy, part of the broader VAT Compliance Strategy.

See e.g. Black, n 12 and 33 above.

57 13

15/2007

may be that risk based systems will tend to neglect lower levels of risk, which if

numerous and spread broadly, may involve considerable cumulative dangers.

Poorly designed risk based approaches, indeed, are likely to lead to persistent non-

enforcement regarding certain types of firm and systemic risks. If such systems

are not supplemented by other programmes, such as those of random inspection

(as Hampton advocated) they can under-deter the lower level risk creators, the

‘forgotten offenders’ who escape prioritisation. The overall effect of regulation is

then not to reduce risk, but to substitute widely spread risks for lower numbers of

larger risks.

A more general problem with risk based regulation is that it tends to focus on

the individual firm, not on the more strategic issue of how to raise compliance

within the regulatory community as a whole. Risk based regulation, moreover, may

even prove unduly narrow in its approach to even individual firms. It may tend to

tailor not merely the targeting but also the severity of its sanctioning approach

according to the level of risk presented by the non-complier. Such a strategy

58

may, however, under emphasise the need to understand why such a non-complier

is not behaving as required and to identify the best regulatory response to that

non-compliance.

In addition, risk based regimes build their analyses by assessing on

accumulated supplies of information. They may, accordingly, impose significant

burdens on businesses (especially if poorly managed) and this may cut across

government desires to reduce burdens and form-filling. They also require

significant resources on the part of regulators to be able to analyse and respond to

risks, and resources may not shift within regulatory organisations in a way which

responds to changes in risk. Nor can it be assumed that risk based regulation

59

always constitutes an efficient use of resources. If a regulatory body prioritises its

deployment of resources by targeting these at highest risks this may prove costly

where the expense of reducing those risks is high because enforcement or

compliance cost are extensive. The efficient way to use a given level of resources

to reduce overall risks (for instance to the environment) is to target not the highest

risks or risk creators but those activities or risk creators that offer the prospects of

the highest risk reductions for the given expenditure of resources. A strategy of

targeting highest risks and ‘most severe’ problems would often fail a cost-benefit

comparison with other strategies.

Finally, as with pyramidic approaches, risk based systems may give risk to

considerable issues of accountability. Even those regulatory agencies that

recognise the virtues of openness, transparency and accountability may tend to

assume that their processes for establishing and applying risk measures and

criteria, and for selecting actionable risks, are uncontentious and technical. In

response, it can be argued that a major effect of risk based regulation is to transfer

Black, n 33 above.

58 For example, NAO, The Financial Services Authority: A Review under s.12 of the Financial Services and Markets

59

Act 2000 (London, April 2007), at [1.10]-[1.15]. 14

Robert Baldwin and Julia Black Really Responsive Regulation

the real locus of policymaking into the recesses of these very processes. The

danger is that risk based regulation will tend to bury policymaking issues deep

within the administrative process, making scrutiny and accountability extremely

difficult. 60

Can it be argued, however, that Malcolm Sparrow’s ‘regulatory craft’

approach deals with the above difficulties? This strategy places one version of risk

based regulation – namely problem solving - at the centre of regulatory strategy. It

separates out the ‘stages of problem solving’ and stresses the need to define

61

problems precisely, to monitor and measure performance and to adjust strategy on

the basis of performance assessments. It also accepts the “dynamic nature of the

risk control game.” What it does not do is paint a picture of the strategic choices

62

that confront regulators in attempting to carry out different tasks or ‘stages’ of the

problem solving process. Sparrow tells us to target key problems and solve these

by developing solutions or interventions and ‘implementing the plan’ – what we

are not told is whether the solution to a given problem lies through ‘responsive’

‘deterrent’ or some other approach. We have no menu of options nor are we

63

offered an explanation of the potential interactions between different regulatory

logics and different strategies for coming to grips with the stages of the problem

solving process – matters that are more fully dealt with by proponents of smart

regulation. The ‘problem-centred’ approach, moreover, assumes, perhaps too

readily, that regulation can be parcelled into problems and projects to be addressed

by project teams. This may well be the case in some scenarios – where, for

64

instance, a particular pollution problem occurs for a narrow and identifiable set of

reasons. In other situations, however, the regulator may be faced with a host of

different kinds of errant behaviour that cumulatively cause a mischief. To focus on

the mischief by defining it as ‘the problem’ may not help us a great deal in seeking

to devise strategies for responding to it. What may be more useful is to identify the

challenges that have to be faced, the available options (in terms of tools and

strategies) and the kind of process that will foster working towards an optimal

application of tools and strategies over time.

To summarise, the responsive, smart, risk based and ‘regulatory craft’

approaches all contribute to regulatory understandings, but even leaving aside the

difficulties discussed above, they can be said to leave a residual need for further

engagement with the considerable body of challenges that regulators face in their

actions of detecting, constructing and responding to non-compliance.

See Black, n 12 above.

60 Sparrow, n 13 above, Chapter 10.

61 ibid 274.

62 See Gunningham and Grabosky, n 23 above, Chapter 6.

63 Sparrow, n 13 above, 232, concedes that the problem solving approach “is predicted on the way

64

hypothesis that a significant proportional of day to day accidents, incidents, violations and crimes fall into

patterns that can be discerned.” 15

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REMAINING CHALLENGES AND REALLY RESPONSIVE

REGULATION

‘Responsive regulation’ is a very flexible moniker, which makes commenting on it

difficult: it is hard to pin down just what it refers to. Indeed ‘responsiveness’ has

been used in the context of debates on regulation in a number of ways.

‘Responsiveness’ in political science literature refers to the responsiveness of

bureaucracies, including regulators, to public opinion, usually as framed by the

media. In the enforcement context, as explored above, ‘responsive regulation’

65

refers to Ayres and Braithwaite’s enforcement pyramid and the ‘tit for tat’

responsiveness of regulator and regulatee in an iterated, two actor game.

However, in the hands of John Braithwaite responsive regulation has expanded

considerably. It has now broken free of its enforcement roots to encompass far

broader notions of deliberative democracy and restorative justice, and to provide a

tools-based framework for enhancing the regulatory capacity of the state or

providing an alternative to it. 66

Braithwaite is not alone in advocating ‘responsiveness’ for regulatory regimes.

Selznick has been a long proponent of ‘responsive’ law, and in turn, regulation.

However ‘responsiveness’ is used by Selznick in much broader sense than the ‘tit

for tat’ strategy of the original Ayres and Braithwaite formulation to refer to the

need for organisations and institutions (such as law) to have the capacity to

respond to their environment whilst maintaining their own internal institutional

integrity. With respect to the legal system, this requires that legal institutions and

67

legal ideas be open to social knowledge and attentive to all legitimate interests,

whilst at the same time the legal system retains its own basic commitments and its

capacity to function. Only then will social justice be achieved. A responsive legal

68

order treats social interests as objects of moral concern, and recognises that the

vitality of social order comes from below. Indigenous social ordering is based on

shared experience, reflects shared sentiments and is sustained by practical needs. 69

It should be afforded considerable moral worth as the settings of this ordering, in

firms, schools, families, religious organisations, are extensions of personhood,

settings in which social participation is most direct and effective. However,

responsive law must be more than a passive recipient of claims, more than a

‘friendly, non-intrusive facilitator of private transactions and associations’. It must

criticize and reconstruct such social ordering even as it accepts a duty to defer to

C. Hood, H. Rothstein and R. Baldwin, The Government of Risk: Understanding Risk Regulation Regimes

65

(Oxford: Oxford University Press, 2001), Chapter 6 for review and analysis.

Braithwaite, ‘Responsive Regulation and Developing Economies’, 21 above.

66 ibid 336.

67 P. Selznick, The Moral Commonwealth (Berkely: UCLA Press, 1992) 463-75; P. Nonet and P. Selznick,

68

Law and Society in Transition: Toward Responsive Law (New York: Harper / Colophon, 1978). G. Teubner,

‘After Legal Instrumentalism: Strategic Models of Post-Regulatory Law’ in G. Teubner (ed), Dilemmas of

Law in the Welfare State (Berlin: Walter de Gruyter, 1986); G. Teubner, ‘Substantive and Reflexive

Elements in Modern Law’ (1983) 17 Law & Soc Rev 239; G. Teubner, ‘Juridification - Concepts, Aspects,

Limits, Solutions’ in G. Teubner (ed), Juridification of the Social Spheres (Berlin: Walter de Gruyter, 1987).

Selznick, ibid 468-472.

69 16

Robert Baldwin and Julia Black Really Responsive Regulation

it. In a regulatory context, responsive regulation is principles-based and problem-

centred rather than rule-centred. It is less interested in rule-compliance than in

pursuing the reasons behind the rule and in mobilizing energies for the

achievement of public purposes, which requires respect for, and deference to, the

needs of the enterprise. However, responsive legal institutions must also be

70

institutions of inquiry: they must be prepared to consider the effects of their own

actions and to ask how far rules, procedures and doctrines meet the needs they

were meant to serve. 71

Selznick offers responsive law as a prescription: the need for organisations to

respond to their environment whilst retaining their own integrity. In contrast,

Teubner’s theory of reflexive law is premised on the assumption that systems are

already self-referential: that they will always operate in such a way as to maintain

their own integrity, and the challenge for regulation is to irritate their environment

in such a way that they change their operation to be compatible with the

regulatory system’s goals. Responsiveness is sometimes used as a synonym for

72

reflexiveness, and the similarity of the policy prescriptions that result from both

can lead to their conflation. Both prescribe the need to recognise the significance

of internal processes of systems / organisations, to understand their strategic

operation, to set the legal prerequisites for self regulation and to develop learning

capacities for social systems / organisations which are orientated toward re-

introducing the consequences of their actions into their own reflexion structures.

However, although Teubner’s initial formulation was influenced by Nonet and

Selznick’s conceptualisation of responsive law, the theoretical roots of reflexive

law lie in autopoiesis and thus are quite distinct from the former and from the

broader theories of institutionalism underlying Selznick’s reformulations.

The conception of responsiveness developed here is closer to Selznick’s

formulation of responsiveness than it is to Teubner’s reflexive law. Moreover,

although our conception of really responsive regulation is developed in the

enforcement context, it is potentially applicable to all aspects of regulatory

performance. We draw on a range of existing literature in regulatory and on

organisational theory and on our own empirical research to argue that to be ‘really

responsive’, regulators have to respond not merely to firms’ compliance responses

but also to their attitudinal settings; to the broader institutional environment of the

regulatory regime; to the different logics of regulatory tools and strategies; to the regime’s

own performance; and finally to changes in each of these elements. It is worth briefly

elaborating each of these elements.

ibid 470-473.

70 ibid 472.

71 Teubner, ‘After Legal Instrumentalism: Strategic Models of Post-Regulatory Law’ n 68 above; Teubner,

72

‘Substantive and Reflexive Elements in Modern Law’, n 68 above; Teubner, ‘Juridification - Concepts,

Aspects, Limits, Solutions’, n 68 above. 17

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R R ’ A S

ESPONSIVENESS TO EGULATEES TTITUDINAL ETTINGS

In a really responsive regulatory regime, responsiveness means responding to the

operating and cognitive framework of the particular firm or, put in other terms, its

own ‘attitudinal setting’. This goes beyond the question of how the firm, or

different individuals within the firm, interact on a personal level and whether

relationships are cooperative or antagonistic to look at the broader context that

shapes the firm’s response to the regulatory regime. Recent work on compliance

shows the importance of motivational postures, the social signals that individuals

send to the regulator and to themselves to communicate the degree they accept

the regulatory agenda and the way in which the regulator functions and carries out

its duties on a daily basis. This work identifies five types of motivational posture:

commitment to or accommodation of the regulatory agenda; capitulation to the

regulatory authority; resistance, game playing and disengagement. In its policy

73

prescription, which is further refinement of the original pyramid, this work retains

a focus on the nature of the firm-regulator relationship, and looks to that

relationship to change motivational postures, for example through improving the

procedural fairness in the administration of the regime, or examining how threats

or rewards affect motivational postures. It is suggested that we need to go

74

beyond the confines of this relationship to examine broader factors. Work in the

institutional theory of organisations which focuses on how organisations respond

to their environment emphasise that responses are a complex combination of

rational and institutionalised responses, in which strategic action is structured by a

combination of internal and external institutional pressures, including pursuit of

profitability or reputation, market position, congruence of external regulatory

demands and internal goals, the means by which regulatory norms are imposed,

the perceived fairness of the regulatory regime and the nature of the external

environment. 75

Really responsive regulation thus demands that regulators take account of the

cultures and understandings that operate within regulated organisations. A really

responsive regulation approach, moreover, draws attention to the kinds of

problem that arise when there are tensions between attitudinal settings. It also

A similar categorisation has been developed in institutional theory: Oliver identifies five response

73

strategies: acquiescence, compromise, manipulation, avoidance or defiance: C. Oliver, ‘Strategic

Responses to Institutional Processes’ (1991) 16(1) Academy of Management Review 145; or see eg HM

Customs and Excise categorisation, n 56 above.

On the importance of perceptions of fairness of the regulatory regime for compliance see L. Feld and

74

B. Frey, ‘Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and

Responsive Regulation’ (2007) 29(1) Law and Policy 102; E. Ahmed and V. Braithwaite, ‘Higher Education

Loans and Tax Evasion: A Response to Perceived Unfairness’ (2007) 29(1) Law and Policy 121; V.

Braithwaite, K. Murphy and M. Reinhart, ‘Taxation Threat, Motivational Postures, and Responsive

Regulation’ (2007) 29(1) Law and Policy 137; T. Tyler, Why People Obey the Law: Procedural Justice, Legitimacy

and Compliance (New Haven: Yale University Press, 1990).

For a summary from an institutionalist perspective see Oliver, n 73 above; W.R. Scott, Institutions and

75

Organisations (Thousand Oak, Calif.: Sage, 2nd ed, 2001). See also C. Parker, The Open Corporation

(Cambridge: Cambridge University Press, 2002). 18

Robert Baldwin and Julia Black Really Responsive Regulation

highlights the effects of such tensions across the different tasks that are involved

in the regulatory enforcement process – a matter to be returned to in Section 3

below. I E

R

ESPONSIVENESS TO NSTITUTIONAL NVIRONMENTS

The second element of really responsive regulation is that is recognises and

responds to the constraints and opportunities that are presented by the

institutional environments within which the relevant regulators act. In short, this

is a plea for institutional theories to be taken more seriously by regulatory scholars.

There are different versions of institutionalism, which are distinguished by the

model of stance they take on the extent to which structure or agency determines

behaviour. However, all agree that institutional environments are constituted by

76

the organisational / regulatory, normative, cognitive and resource-distribution

The actions and decisions of

structures in which the regulator is situated. 77

organisations and individuals (both regulators and regulatees) is thus structured by

the norms regulating their conduct, by the senses of appropriateness of actions, of

understandings of how the environment operates, and by the distribution of

resources between themselves and others with whom they interact. Historical

institutionalism further emphasises the role of the political and legal infrastructure

in which the regulator (state or non-state) is situated in shaping actions and

decisions: the patterns of formal and informal control over the regulator, of veto

points in decision making, its position in the infrastructure of a broader regulatory

regime (eg a state or non-state based transnational regime, or EU regime, or local

governmental regime), and the distribution of resources, including strategic

resources, within that regime. This notion of institutional environment is akin to

Haines’s idea of ‘regulatory character’, but the delineation of the exact nature

78

and role of the institutional environment in shaping individual and organisational

decisions has also long been the concern of institutionalists in sociology, political

science and international relations. Really responsive regulation emphasises the

79

relevance of the institutional context not only of the regulatee, but of the

regulator, in shaping the regulators’ enforcement activities.

For summaries see T. Koeble, “The New Institutionalism in Political Science and. Sociology” (1995) 27

76

Comparative Politics 231; P. Hall and R. Taylor, ‘Political Science and the Three New Institutionalisms’

(1996) 44(4) Political Studies 936; J. Black, ‘New Institutionalism and Naturalism in Socio-Legal Analysis:

Institutionalist Approaches to Regulatory Decision Making’ (1997) 19 Law and Policy 51-93.

Scott, n 75 above; W.W. Powell and P.J. DiMaggio (eds), The New Institutionalism in Organizational

77

Analysis (Chicago: Chicago University Press, 1991).

F. Haines, Globalization and Regulatory Character (Aldershot: Ashgate, 2005).

78 See e.g. P. Evans, P. Rueschmeyer and T. Scokpol, Bringing the State Back In (Cambridge: Cambridge

79

University Press, 1985); G. Ikenberry, ‘Conclusion: An Institutional Approach to Foreign Economic

Policy’ in G. Ikenberry, D.A. Lake and M. Mastanduno (eds), The State and American Foreign Economic Policy

(Ithaca: Cornell University Press, 1988); P. Hall and R. Taylor, ‘Political Science and the Three New

Institutionalisms’ (1996) 44(4) Political Studies 936; J. Goldstein and R.O. Keohane (eds), Ideas and Foreign

Policy: Beliefs, Institutions and Political Change, (Ithaca: Cornell University Press, 1995). 19

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R L D R T

ESPONSIVENESS TO THE OGICS OF IFFERENT EGULATORY OOLS AND

S TRATEGIES

The third element in really responsive regulation is responsiveness to the logics of

different regulatory strategies and tools. This is not an aspect of regulation which

has received detailed or systematic attention. Some work has been done on the

‘mixing’ of different regulatory tools, although this work has not extended more

80

specifically to enforcement tools, and to the difficulties of combining punitive and

compliance enforcement strategies. There has also been work on the appropriate

81

use of different types of rules, which focuses on the nature of the choices involved

in rule design and their implications, to this extent seeing rules as a particular

regulatory technology that has certain properties which can be manipulated in

various ways. We suggest that different regulatory strategies or ‘tools’ should be

82

understood as technologies: ways of understanding cause and effect relations and

the products of those understandings. Different regulatory strategies

83

(technologies) embody, or at the least place emphasis on, different understandings

of the nature of behaviour or of an institutional environment, and in turn have

different preconditions for effectiveness (which are that the institutional

environment or behaviour conforms to those foundational understandings).

Strategies of disclosure, for example, assume a model of behaviour which at the

very least approximates to that of a rational actor. Strategies of compliance assume

a model of behaviour (and thus firms’ responsiveness) which differs from

strategies of deterrence. Different regulatory strategies, it is suggested, thus can

have different logics.

The concept of ‘regulatory logic’, it should be noted, differs from the idea of

regulatory objectives (such as cleaner environments or safer workplaces). Such

objectives, may be sought to be achieved through different technologies and logics

(e.g. of punishment or restoration or rehabilitation or through ’professional’ or

‘commercial’ logics). Such logics involve distinctive relationships and modes of

conversing with regulated parties – a punitive message, for instance, will be framed

and received differently from a rehabilitative message. Coherence of logic matters

because confusion detracts from effective regulation. Really responsive

84

regulation, moreover, seeks to identify the regulatory logics engaged in different

regulatory tasks. Regulators cannot combine, say, punitive, rehabilitative and

restorative regulatory logics across different enforcement tasks (such as detection

and response development, discussed below) without this giving rise to potential

tensions – which usually involve institutional or communications difficulties.

Gunningham and Grabosky, n 23 above.

80 n 14 above.

81 Baldwin, n 11 above, and J. Black, Rules and Regulators (Oxford: Oxford University Press, 1997).

82 See J. Black, ‘Decentred Regulation: Understanding the Role of Regulation and Self Regulation in a

83

“Post-Regulatory” World’ (2001) 54 Current Legal Problems 103-147.

Waller also refers to this, describing it as ‘institutional integrity’: V. Waller, ‘The Challenge of

84

Institutional Integrity in Responsive Regulation: Field Inspections by the Australian Tax Office’ (2007) 1

Law and Policy 67. 20

Robert Baldwin and Julia Black Really Responsive Regulation

Institutional problems arise when different regulatory bodies play different and

non-harmonious roles within a regime. Communications problems are caused

when different logics are based on different assumptions, value systems, cultures

and founding ideas so that messaging across logics involves distortions and

failures of contact. Responsive regulation requires escalation up a punitive scale

that crosses logics; smart regulation theory encounters such issues in a more

complex framework (and to a degree addresses complementarities and

inconsistencies of approach) and risk based regulation focuses on the

identification of priorities and targets rather than the potential difficulties of

combining regulatory logics. In drawing closer attention to the nature of different

regulatory technologies and their inherent logics, really responsive regulation seeks

to provide a way of coming to grips with these tensions within a conceptual

framework that identifies potential difficulties and provides a foundation for their

resolution. R ’ P E

R

ESPONSIVENESS TO THE EGIME S OWN ERFORMANCE AND FFECTS

Fourthly, really responsive regulation has to be responsive to the regime’s own

performance. We are not alone in emphasising the need for performance

evaluation and modification. As noted above, one important element of Selznick’s

conceptualisation of responsive law (and by extension, regulation) is that law

becomes an instrument of inquiry into both its implementation and the premises

on which the law, is based. Sparrow and Braithwaite have separately developed

85

detailed policy prescriptions for the design of regulatory performance measures. 86

In the context of enforcement, such performance sensitivity requires that the

regulator is capable of measuring whether the enforcement tools and strategies in

current use are proving successful in achieving desired objectives. This will

demand not merely an assessment of the performance of the existing regime but

also an understanding of the activities that detract from the achievement of

objectives but are beyond the scope of the current regulatory regime or which are

‘off the screen’ in the sense that they are going undetected – what Sparrow would

refer to as ‘invisible’ offences.’ If this first challenge is not met, the regulator will

87

not be in a position to judge whether changes in tools or strategies are called for

or to estimate what kinds of changes are needed. This evaluation will be demand

an analysis of the fit between the relevant rules or requirements and the regulatory

body’s objectives.

Performance sensitivity, moreover, rests on the regime’s ability both to assess

its performance in the light of its objectives and to modify its tools and strategies

accordingly. A really responsive regulation approach would call for the adoption

88

n 67 above, 472.

85 Sparrow, n 13 above.

86 See ibid 192, 272-3.

87 As we discuss below, these modifications may require legal or policy changes which can only be made

88

by others at the national or supranational (e.g. EU) level. 21

15/2007

of assessment mechanisms that feed into and make the case for appropriate

modifications of tools and strategies for detection, response development,

enforcement, assessment and modification. It would demand not only that that

the potential need for modification is carried out within an organising framework

that attends to the five stages of the regulatory enforcement process but also that

it is seen as an issue to be placed constantly on the policymaking agenda.

Developing robust systems of performance assessment is a critical part of

really responsive regulation. It is, however, a notoriously difficult task. Each of the

four main approaches to performance assessment – input, process, output and

outcome assessments – has its own logic, is useful for different purposes, and, in

turn, is of relevance to different parts of the regulatory organisation and its

evaluators. Input based assessment of performance is common: the

89

measurement of numbers of inspectors and inspections, resources devoted to

control and other inputs. Process or compliance based assessment is also

common: measuring adherence to procedural requirements and other laws,

policies or guidelines. What is less common is either output based assessment:

measuring the extent to which the goals of the specific programme are achieved,

or longer term outcome based assessments: evaluating the impact of the regulatory

system against the broad objectives of the agency (rather than the specific

programme).

Really responsive regulation pinpoints the need to assess performance not

only on a continuing basis, but also in a manner that takes on board those shifts in

objectives and regulatory environments that have been referred to above. Really

responsive regulation does not eradicate the difficulties of performance

assessment but, by placing assessment at the core of regulatory activity, it may

facilitate its execution – insofar as it encourages the creation of ongoing systems

and processes that will produce relevant data in a timely and organised manner.

C

R

ESPONSIVENESS TO HANGE

Finally, in order to be really responsive, regulatory strategies have to adapt to

movements in regulatory priorities, circumstances and objectives. These changes

may be driven by factors internal to the regulator or imposed on the regulator

from outside. Thus, shifts may be due to policy adjustments by the regulator or

because of developments in such matters as attitudes and preferences, industrial

Performance evaluation is a key part of the better regulation agenda: see eg NAO, Measuring the

89

Performance of Government Departments (London, 2001); OECD, Results Based Management in the Development Co-

operation Agencies: A View of Experience, (OECD, 1999) OECD, Working Party on Regulatory Management

and Reform, Regulatory Performance: Ex Post Evaluation of Regulatory Tools and Institutions , GOV/PGC/REG

(2006) 6 (OECD, 2004). On the difficulties of assessing performance see eg P. Hopkinson, P. James, A.

Sammut, ‘Environmental performance evaluation in the water industry of England and Wales’ (2000)

43(6) Journal of Environmental Planning and Management 873; on responses to performance evaluation see e.g.

S. Modell, Performance Measurement and Institutional Processes: A Study of Managerial Responses to

Public Sector Reform’ (2001) (12) Management Accounting Research 437; G. Bevan and C. Hood, ‘What’s

Measured is What Matters: Targets and Gaming in the English Healthcare System’ (2006) 84(3) Public

Administration 517. 22

Robert Baldwin and Julia Black Really Responsive Regulation

practices and technologies, types of regulated actors, numbers of concerns

regulated or governmental policies and legislation or other changes in the

institutional environment. The set of regulatory tools and strategies that is optimal

will vary according to differences in the regulatory environment. If, for instance,

governments make large scale taxation, policy or legal changes, or if they allow

new markets to develop, this is likely to affect the kind of regulatory and

enforcement regime that best achieves desired objectives as given area. If, for

example, the government introduces an emissions trading scheme to control a

toxic water pollutant that is used in a certain production process, the Environment

Agency might be well-advised to reconsider its use of command –based controls

over that substance.

The challenge for regulators, in such a context, is to operate systems that are

sensitive to such changes and can adapt accordingly. The difficulty with pyramidic

and risk based systems is that they incorporate no core mechanism that assesses

the need for systemic and strategic change – and evaluates this on the basis of

evidence. Proponents of responsive regulation might, it should be noted, point

here to the ‘pyramid of regulatory strategies.’ This pyramid, however, involves

90

the state in signalling to industries that it will escalate strategies from self-

regulation towards externally imposed command regimes. What it does not offer is

an explanation of how the need for such escalation is to be assessed and how

escalation is to be managed in a world of change. Similarly, advocates of ‘smart

regulation’ would remind us that unsatisfactory regulatory outcomes can be dealt

with in their system by the process of ‘sequencing’ regulatory instruments. The

91

idea behind sequencing is that “certain instruments would be held in reserve, only

to be applied as and when other instruments demonstrably fail to meet pre-

determined performance benchmarks. Logically, such sequencing would follow a

progression of increasing levels of intervention.” As with responsive regulation,

92

however, smart regulation leaves work to be done to explain what is involved in

evaluating success or failure or the rationales for adopting one rather than another

method of sequencing. In the case of risk based regulation, any capacity of the

regime to respond to changes in regulatory objectives or environments is

dependent on the capacity of the system to collect information on the need for

such changes and to act on such information through revisions in risk calculations

and weightings. A problem with the risk based approach, however, is that, as

noted, it will tend to focus on existing high level risks rather than smaller,

cumulative, or newly emergent risks. It will tend to be blind to risks that are not

picked up in the existing analysis and has no core method of identifying new

regulatory challenges and adjusting to these.

Commentators such as John Braithwaite are, of course, not unaware that the

processes of regulatory realignment involve challenges or that contentious issues

attend the control of regulatory reshapings. In a recent article Braithwaite has

n 14 above, 38-40.

90 Gunningham and Grabosky, n 23 above, 444-7.

91 ibid 444.

92 23

15/2007

pointed out that within networked regimes (in which regulatory functions and

responsibilities are spread across numbers of organisations of different types)

there are dangers of oligarchic power and issues of access to policy frameworks. 93

He suggests that the republican ideal is that contests between interests should act

to prevent domination and that this joins with the responsive approach to offer a

‘combined ideal… that pyramidal escalation to contest domination drives

contestation down to the deliberative base of the pyramid so that regulation is

conversational’ It might be unduly optimistic, however, to assume that such

94

ideals will commonly be realised so that regulatory conversations steer and shape

regulatory systems in optimal ways. There are dangers, as indicated, that within

networked regimes undue influence may be exercised by certain interests, that the

parties in such conversations may lack good information on regulatory

performance and that desirable regulatory changes may not take place because of

deadlocks and disagreements. A really responsive regulation approach suggests

that positive steps have to be taken to rise to the challenges first, of encouraging

performance sensitivity through assessment procedures and, second, of fostering

the capacity of regimes to change regulatory direction so as to adapt to changes in

circumstances, priorities and objectives, including the cultivation of changes in

organisational culture that may be needed to respond to these changes. 95

The need to address these challenges is arguably the more urgent when, as is

common, regulatory systems involve numbers of regulatory bodies operating

different types of controls – i.e. when regulatory regimes are networked rather

than simple. If networked regulatory regimes are to be shaped by complex

contests and conversations, it is essential that such processes operate against a

background of good information concerning the performance of the extant

regime. Assessing performance across networked regimes is, of course,

considerably more difficult than measuring the effects of a simple command sytem

but that difficulty makes the need to rise to the challenge the more urgent. The

greater the potential for confusion in a regulatory system, the stronger is the case

for assessing whether current methods and mixes are working well or badly.

Similar arguments can be made for meeting the challenge of ensuring that

systems can be adjusted and modified on the basis of assessments of performance.

There are real dangers that networked, smart, regulatory regimes lock their

involved actors into agreed positions and approaches so that salutary reforms

cannot be brought into effect. In an ideal world, conversations between

networked regulatory actors might be expected to produce desirable regulatory

adjustments. In a less than ideal world, such conversations may lead to confusions,

entrenched positions, inabilities to respond to regulatory failures and blame

Braithwaite, ‘Responsive Regulation and Developing Economies’, n 21 above. See also L. O’Toole and

93

K. Meier, ‘Desperately Seeking Networks: Cooptation and the Dark Side of Public Management in

Networks’ (2004) 64(6) Public Administration Review 681.

Braithwaite, ‘Responsive Regulation and Developing Economies’, n 21 above, 893.

94 See e.g. Black, n 12 above; J. Job, A. Stout and R. Smith, ‘Culture Change in Three Taxation

95

Administrations: From Command and Control to Responsive Regulation (2007) 29(1) Law and Policy 84.

24


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DETTAGLI
Corso di laurea: Corso di laurea magistrale in economics and political science
SSD:
Università: Milano - Unimi
A.A.: 2011-2012

I contenuti di questa pagina costituiscono rielaborazioni personali del Publisher Atreyu di informazioni apprese con la frequenza delle lezioni di Theories of Regulation e studio autonomo di eventuali libri di riferimento in preparazione dell'esame finale o della tesi. Non devono intendersi come materiale ufficiale dell'università Milano - Unimi o del prof Ammannati Laura.

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