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REGULATORY AGENCIES 501

control and agency autonomy, the dual process of deregulation and

reregulation, and the problems of role purification and coordination as the

main research issues. We try to discuss preconditions of smart practice

related to the new regulatory policy, and outline different interpretations

of this. The second part outlines the theoretical basis for regulatory reform.

We introduce a broad institutional approach that rejects single-factor

explanations in favor of a blend of historical–cultural context, national

political strategies, and external pressures as the key to understanding

regulatory agencies and regulatory reform. This approach will be con-

trasted with an OECD official practitioner model of agencies. In the third

part of the article we focus on regulatory reform in Norway, giving a brief

introduction to the Norwegian reform and agency context followed by an

analysis of the radical regulatory reform policy introduced by the Centre-

Conservative Norwegian government in the period 2001–2005. We then

illustrate how regulatory reforms and agencies work in practice by focus-

ing on two specific cases, and we included a discussion of how smart the

new practice might be. We conclude by discussing regulatory reform

policy in the light of the theoretical approaches outlined.

The Research Issues

A central issue in studying reform of regulatory agencies is the tension

involved in the dual process of introducing both more autonomy and

more political control. Reorganization of public activity in Norway over

the last 10 years has been characterized by a gradual move away from an

integrated to a more fragmented state. Regulatory functions are now

concentrated in specific administrative bodies, whereas commercial and

service tasks have been transferred to specific state-owned companies

(Christensen and Lægreid 2003a). At the same time, the regulatory agen-

cies have been under considerable pressure to reorganize.

This change from a unified central administration with mixed roles

under ministerial rule to a separation of the different functions/tasks and

their allocation to more autonomous bodies has yet to be studied system-

atically. Several of the reforms have weak empirical foundations and there

is generally little systematic documentation of the effects of such reforms,

but some more general studies seem to indicate that public choice-related

arguments for increasing political control through devolution and single-

purpose organizations are difficult to fulfill in practice (Boston et al. 1996;

Pollitt and Bouckaert 2004). The degree to which the goal of independence

is fulfilled for the supervisory agencies remains an empirical question.

Creating separate, specialized agencies can contribute to a clearer demar-

cation of responsibilities and roles and greater efficiency and predict-

ability, but it may also result in increased complexity, problems of

coordination, higher transaction costs, and reduced potential for effective

political control and accountability (Christensen and Lægreid 2001). Thus

502 TOM CHRISTENSEN AND PER LÆGREID

it could be disputed what may actually be smart practice concerning

regulatory reform.

One main research question related to this regulatory reform concerns

the complex trade-off between political control and agency autonomy.

How far can one go under the new regulatory regime in increasing an

agency’s independence without losing political control? Through the

process of modernization, attempts have been made to satisfy both

demands simultaneously by finding an optimal blend of autonomy and

control. The question is how a balance can be achieved in practice and

how stable such a balance will be. The political executive, supported by

the OECD, would like to decentralize decisions in individual cases, while

at the same time striving for stronger central coordination of regulatory

policy (St.meld. no 17 2002–2003; OECD (2003). In this article we challenge

the assumption that such reforms will enhance political control. Is it

possible to accommodate political accountability and control even as pro-

fessionalization, autonomization, deregulation, and market orientation

gain momentum?

Although deregulation constitutes an important component of regula-

tory reforms, a process of “reregulation” is also going on, involving new

forms of control and supervision (Christensen and Lægreid 2006; Majone

1996; Vogel 1996). Thus we also face a complex process of simultaneous

deregulation and reregulation. An important question is whether these

new forms of control are emerging as a supplement to established

methods, thereby resulting in increased complexity, or whether they are

replacing them; a third possibility is that old and new are merging to form

new innovative methods of control and supervision. In contrast to the

focus of New Public Management on deregulation and autonomy, there

has been an increase in the intensity, complexity, and specialization of

regulation in recent decades (Hood et al. 1999). However, the oversight

“explosion” varies between countries and policy areas and often assumes

new hybrid forms (Hood et al. 2004).

The streamlining of the roles of regulator and controller implies an

attempt to isolate and separate these roles from the other roles of the

state—that is, a reflection of increased horizontal specialization following

the principle of “single-purpose organizations” (Boston et al. 1996). Thus

we also face the problem of role specialization and the challenges of

coordination. This raises questions of feasibility. How are the dual sepa-

ration of regulatory authorities both from the provider and producer roles

fulfilled by state-owned companies, and from the ownership role played

by the state, work in practice (Christensen and Lægreid 2003a)?

An important research question, summing up the main features of the

new regulatory reform in Norway, inspired by New Public Management

(NPM) and the OECD policy, is: What are the preconditions for a smart

practice and how might such a policy result in smart practice? The offi-

cial OECD regulatory model seems to indicate that increased vertical

differentiation or structural devolution potentially, implying a hands-off

REGULATORY AGENCIES 503

attitude from the political executives, is smart. The same argument is

related to increased horizontal differentiation, through nonoverlapping

roles and functions. But it is interesting that the literature about smart

practice, even though sympathetic toward these principles, talks quite a lot

about some different features. Bardach (1998, 2004) is preoccupied with

“interagency collaborative capacity” and “craftsmanship thinking” as a

combination of creativity and public spiritedness. He sees these features as

major preconditions for smart practice. Barzelay (2004) stresses the verti-

cal integrative efforts, joined up government, and hands-on attitudes of

political and administrative leaders as supporting successful innovation.

As will be shown through the two case studies, the new Norwegian

regulatory practice is actually combining old and new regulatory policy

and we will analyze whether this hybrid in fact produces smarter practice

than sticking to one or the other in pure form.

The Theoretical Basis

Regulation can be understood as a specific type of public activity with its

normative foundations in law and legislative procedures. Control over

what or who is subject to regulation is exercised by various administrative

bodies and civil servants. This implies that studies of regulation may be

regarded as part of general administrative research. Like the public

administration in general, regulatory agencies are part of the democratic

polity. They have defined goals, are linked to various administrative fields,

have their own historical constraints and have developed various practices

in dealing with clients and superior political executives. Generally, regu-

latory agencies have a dual purpose: securing certain socially desirable

values and assets, and protecting law-abiding subordinate actors from

dishonest conduct and competition by others.

By agencies we mean organizations whose status is defined in public

law and whose functions are disaggregated from the ministry. Agencies

have some autonomy from the ministry but are not fully independent,

because the ministry has the power to alter the budgets and main goals of

the agency (Pollitt et al. 2004). Regulatory agencies are a special type of

agency, but it is easier to describe their similarities to other agencies than

their differences, because regulatory functions are often integrated into or

related to other functions, even in those regulatory bodies said to have a

mainly regulatory role.

There is a growing literature on agencification. Three of the main ques-

tions addressed in the literature are (Pollitt et al. 2004): Why has the

agency form become so popular over the past 15 years? How can agencies

be steered and controlled by their parent ministries? Under what condi-

tions do agencies perform well? To answer these questions one can use

three different groups of theories (Pollitt 2004; Pollitt et al. 2004). The first

group, which includes the rational choice and principal–agent models, can

be broadly termed economic approaches (Dunleavy 1991; Molander,

504 TOM CHRISTENSEN AND PER LÆGREID

Nilsson, and Schick 2002; James 2003). These theories argue that agencies

are chosen because they are more efficient than other organizational forms

in central government. Their prescription for controlling agencies is to

design well-functioning contracts. According to these theories, perfor-

mance depends on how easy it is to monitor agencies and to what degree

the agencies’ interests differ from those of the ministries.

The second group of theories, which entail a more conventional and

broader organizational research approach, seek to identify factors to

explain the creation, maintenance, activities, and performance of agencies.

These factors range from structural instrumental features and deliberative

political choice by political and administrative executives, to historical-

institutional context, polity features, socioeconomic forces, and external

pressure from the technical environment (Christensen and Lægreid 2001;

Pollitt and Bouckaert 2004). Built in here is also a negotiation perspective,

suggested by Cyert and March (1963) and March and Olsen (1983), stress-

ing that public decision-making processes might result from negotiations

and compromises between actors with different interests.

The third group of theories—which might be labeled the interpre-

tative or socially constructive approach—is represented by the neo-

institutionalist school, which focuses on how organizational forms may

spread via the mechanisms of imitation, fashion and translation (Meyer

and Rowan 1977; Powell and DiMaggio 1991). Rhetoric and symbols are

central features here. This approach, however, has more to say about the

emergence, existence and popularity of agencies than about their perfor-

mance or how they are steered.

Our approach follows Pollitt et al. (2004) and is a combination of con-

ventional organizational research and neo-institutionalism, in a broad insti-

tutional perspective (Christensen and Lægreid 2001). According to this

approach, changes and reforms are both encouraged and discouraged by

institutions (Brunsson and Olsen 1993; March and Olsen 1989). There is

interplay between institutional and historical links, conscious and planned

reform initiatives, and adjustment to external forces. We ask whether there

is a specifically Norwegian style of regulation, to what degree there has

been an incremental adaptation to the market and competition perspective

espoused by many international organizations, or whether there is cultural

collusion. The new international regulatory orthodoxy, enhanced by the

emerging universalistic reform model, will be examined and interpreted in

terms of context. The challenge is to describe and provide a better under-

standing of the dynamic balance between the institutional spheres of the

market, professional expertise, autonomous agencies, and representative

democratic bodies in the field of regulatory reform.

In contrast to this broad institutional approach to regulatory agencies,

the “official model” is much more one-sided and we now turn to this

model by focusing on the OECD approach to regulatory reforms. In 1997

the OECD launched its Regulatory Reform Program (OECD 1997). Five

years later Norway was assessed as country number 17 in row in order to

REGULATORY AGENCIES 505

reform regulations to foster competition, innovation, economic growth,

and important social objectives (OECD 2003). The OECD acknowledged

that the Nordic incremental, consensus-oriented model of governance,

emphasizing egalitarian values, a high level of mutual trust, solidarity,

high standards of social welfare, an active intervening state, broad partici-

pation from affected interests, and a large public sector, had been success-

ful. In spite of this success, the OECD report suggested that Norway

should abandon this governance model and “prepare for the future now.”

The problems are not present today but will come in the future. It was

more or less taken for granted, without any deep analysis, that the inte-

grated, reactive, ad hoc, and piecemeal approach, which balances different

values and goals, should be replaced by comprehensive, proactive, and

systematic regulatory reforms, indicating a smarter practice. The new

recipe is to separate the regulatory role of the state from its roles as owner,

policymaker and commercial actor, to upgrade competition policy to

make it the main goal, to deregulate and liberalize state monopolies, to

reduce state ownership, commercialize public services, and improve the

performance, efficiency, and effectiveness of public spending. What was

not discussed was that such a change might well be at odds with tradi-

tional state norms and values and might cause increased conflicts in

society, thus reducing efficiency and effectiveness and potentially reduc-

ing smart practice.

The recommendation was to separate the regulatory function from the

commercial one and to reduce the potential for ministerial intervention by

making agencies more autonomous and professional. Consensus-based

decision making should be replaced by evidence-based decision making.

Political intervention in particular decisions should be replaced by the

establishment of expert-based appeal bodies outside the political system.

Further recommendations were to clarify the institutional framework and

functional responsibility by formulating clear and unambiguous goals for

the independent supervisory agencies, to improve coordination among

the regulators, and to strengthen the framework for accountability and

improve monitoring of the agencies’ performance.

raison d’être

The official for autonomous agencies, suggested by OECD

to Norway, is that structural separation, more managerial autonomy, and

managerial accountability for results will improve performance (James

2003; OECD 2002a; Pollitt et al. 2004). In practice, however, this has not

been proved as a general finding. The regulatory reform model advocated

by the OECD seems to be driven more by ideology than by evidence-

based facts (Olsen 2004). It would be fair to say that the official model is

more a special case that seems to work pretty well under specific

conditions—namely, in situations with low political salience, where results

and activities are easy to observe, when the tasks do not involve complex

technology, when the risk is relatively low, when the financial resources

involved are fairly modest, and when the policy does not involve redis-

tribution issues. When these preconditions are not fulfilled, however, it

506 TOM CHRISTENSEN AND PER LÆGREID

tends to run into trouble (Pollitt 2005). Other important factors are the

degree of competition and the extent to which international markets,

rules, and regulations are involved. The lesson is that context matters and

that there is no best way of governing agencies. In this perspective smart

practice will be context dependent. Neither the organizational structure,

nor the daily practical work, nor the steering of agencies is standardized.

The Case of Norway

The Norwegian Context of Administrative Deforms and Agencies

The question of whether to organize agencies connected to the Norwegian

ministries, and particularly their organizational affiliation, status, and role

have been important issues for nearly 180 years (Christensen 2003). The

independent agency type with professionals was established around 1850

and has been the dominant one in Norway ever since. In the mid-1950s the

government stated a new principle for agency structure, to delegate some

of their functions and tasks in order to gain more capacity for strategic

thinking (Grønlie and Nagel 1998). The idea was that more technical issues

and routine functions should be moved to the agencies, while policy and

planning tasks should stay with the ministries. The new doctrine resulted

in the establishment of several new agencies over the next 15 years, but

this development slowed down in the 1970s, partly for political reasons

(Grønlie 2001).

The dominant agency model in Norway has historically been rather

unified, with little horizontal specialization. In most agencies administra-

tive functions, regulatory and control functions, and service-production

functions have been combined and integrated. Traditionally, Norway has

not had any type of administrative court. Appeals are directed to the

ministry, which can also instruct the agencies. It is a rather new idea that

there ought to be different types of agencies, even if some of the agencies

have had extended autonomy for some time, mainly in budgetary and

personnel matters and also in some more substantive areas (Statskonsult

2004).

Over the past 15 years, partly inspired by NPM, but also as part of

Norway’s adaptation to the EU and the internal market, a process of

structural devolution has been going on in the Norwegian central public

administration, and the agency model has become more differentiated.

vertical interorganizational

This combines specialization, whereby agencies

horizontal interorgani-

formally are getting more authority, with increased

zational specialization, whereby roles and functions among agencies are

more differentiated and nonoverlapping. Up until the mid-1990s major

public sectors like railways, telecommunications, power, postal services,

forestry, grain sales, airport administration, road construction, and public

broadcasting were organized as integrated government services, whereby

the state held the roles of owner, provider, purchaser, regulator, and

REGULATORY AGENCIES 507

controller. Since then, the commercial parts of these enterprises have

become corporate, while the regulatory parts have been streamlined into

separate agencies, creating a much more fragmented and disintegrated

model. Over time an increasing proportion of agencies have been allo-

cated regulation and scrutiny as their primary task in addition to other,

secondary tasks (Rubecksen 2003).

The developmental significance of this reorganization is related to

several factors. First, this shows the development from an integrated state

model to a management-inspired model where agencies are more autono-

mous and loosely coupled to the ministries. Second, the ministries’ ability

to control the agencies is thereby weakened, political signals are less

significant to the agencies, and it is more difficult for the political executives

to get information from the agencies. This is potentially problematic in a

system where structural devolution is combined with no change in prin-

ciple of ministerial responsibility toward the parliament. Third, the poten-

tial for increasing problems of capacity and coordination was evident.

We will now explore more fully the arguments for adapting some of the

main elements from the OECD practitioner model and see how they are

working in the Norwegian context, that is, whether the preconditions for

smart practice is clearly defined and whether this new policy produce

smart practice in reality.

Recent Regulatory Policy in Norway: A Fundamental Review of

Regulatory Agencies

Under the Centre-Conservative government in Norway from 2001 to 2005,

the whole basis of the agency structure, particularly the regulatory agen-

cies, was discussed several times. Several changes have been imple-

mented, but it remains to be seen whether this will add up to a

fundamental revision of the system. In the following some central argu-

ments in the new trend toward more agencification or autonomization will

be discussed.

In 2003 the Centre-Right minority government put forward a White

Paper to the parliament (St.meld. no 17 2002–2003), proposing changes

in regulatory agencies. Both the OECD’s regulatory program and the

European Economic Area Agreement, which gives Norway access to the

EU internal market, affected the content of this report. So the imitation of

an international standard for organizing regulatory agencies was again

rather evident.

The White Paper upgraded competition policy to a main issue for

regulatory policy. The argument was that even though there were no

major problems with the way regulatory agencies work, it was important

to face future challenges, reflecting the OECD view. This failure to draw on

experience casts some doubt on the means-end character of the reform,

and suggests that it may well be driven mainly by political-ideological

symbols (Christensen and Lægreid 2003b). More use of markets and

508 TOM CHRISTENSEN AND PER LÆGREID

decentralized models of steering and control should be supplemented

with and counterbalanced by stronger regulatory activities on behalf of

collective interests.

Regulatory agencies should have unambiguous roles, thus breaking

with the Norwegian tradition of integrating different roles and functions,

supporting more horizontal specialization in the form of nonoverlapp-

ing roles, as in the principle of “single-purpose organizations” in New

Zealand (Boston et al. 1996). A main objective was to provide more clarity

in the horizontal design of regulatory agencies and each regulatory agency

should have unambiguous and noncontradictory collective goals.

Regulatory agencies should also increase their independence from the

ministries and have stronger professional competence. Political and pro-

fessional considerations and premises should be more clearly defined, and

the way they are to be balanced made more explicit. Political consider-

ations should be confined primarily to setting general norms via laws and

rules; but executive politicians should leave individual cases to be handled

by competent professionals in the regulatory agencies, albeit while main-

taining political control.

The specific proposals based on these goals did not establish a clear-cut

agency system. It was proposed to establish some new agencies, some of

them sectoral, others cross-sectoral, some based on a purpose principle,

others on functions. Moreover, some of the new agencies were the result

of mergers—suggesting less rather than more horizontal specialization. It

was also proposed to change the complaints procedure in several agencies

by establishing independent bodies of appeal. It was also proposed to

move seven agencies out of Oslo.

What is striking about the White Paper and the proposals is that politi-

cal steering and democratic control are hardly mentioned, indicating a

heavy bias toward the NPM-oriented “supermarket state” (Olsen 1988).

The need to strengthen the framework for accountability is not addressed.

Establishing independent bodies over which political control would not

be particularly strong may well raise legitimacy concerns connected with

accountability, but such challenges are not discussed. The impression is

that political control and influence from above, whether from the parlia-

ment or from executive politicians, is inappropriate and should therefore

be undermined. In this respect the report is in tune with the antipolitical

sentiments expressed in NPM (Self 2000). Without engaging in any very

profound analysis, the report argues that the legitimacy of decisions made

by regulatory agencies is based primarily on professional competence and

autonomy, much more so than on the control of executive politicians.

The government report resulted in a tug of war between some major

parties in parliament and was eventually modified concerning the

question of political control (Hommen 2003). When the proposal was

addressed in the relevant standing committee in May 2003, it was obvious

that the Labour Party and the Socialist Left Party had the key (supporting

relocation) to the solution of the question of more independent regulatory

REGULATORY AGENCIES 509

agencies. After some bickering the governmental parties struck a deal with

the two opposition parties, modifying their proposal on this point. The

part of the proposal stipulating that independent appeal boards should

handle complaints or appeals was withdrawn and postponed until the

next election period. This was seen as important by the opponents, because

keeping the handling of the appeals in the ministries is an important part

of political control.

The other part of the deal was more ambiguous and open to interpre-

tations. The proposal to restrict the power of the executive political leaders

to instruct the agencies should be handled case by case, not used as a

general principle. This was nonetheless seen by the minister as a break-

through for the new principle of reduced ministerial instruction. The

opposition, on the other hand, tried to give the impression that this would

lead to very little change in overall political control and was purely of

symbolic importance, because ministers seldom use their right to instruct.

The agreement states that the minister can intervene in important cases

and that he/she can instruct the regulatory agencies to handle specific

cases, implying business as usual. For the Labour Party it was important

not to reduce the opportunities for political control.

The main picture is that there is a loose coupling between the OECD

regulatory policy ideal and general Norwegian regulatory policy. It shows

a government eager to introduce more structural devolution but also

cleavages between political parties, which makes it difficult to bring the

pure OECD practitioner model through in a Norwegian context. Thus,

this policy in practice results in compromises concerning the auton-

omy of regulatory agencies and the organization of the appeals process,

although it does move the regulatory agencies in the direction of more

independence.

Regulatory Reform Processes and Regulatory Agencies in Practice

It is important to distinguish between regulatory policies on the one hand

and specific reform processes and the daily practice of regulatory agencies

on the other hand. The regulatory policy ideals that the political executive

recently have tried to further in Norway very much attend to the OECD

official model in stressing that the preconditions for smart practice is

structural devolution and horizontal specialization. We have shown that

the decided policy more is a hybrid where these features are important,

but not totally dominant. We will now illustrate the variety of reform

processes and agency practice by focusing on two cases. The first is con-

nected with the reorganization of internal security, focusing on horizontal

coordination. It exemplifies the loose coupling between regulatory policy

programs and reform processes. The second is the Teletopia case, focusing

on vertical coordination. It demonstrates how regulatory agencies work in

practice and the practical problems of balancing autonomy and control on


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DESCRIZIONE DISPENSA

Materiale didattico per il corso di Theories of Regulation della prof.ssa Laura Ammannati. Trattasi dell'articolo di Tom Christensen e Per Legreid dal titolo "Regulatory Agencies—The Challenges of Balancing Agency Autonomy and Political Control" riguardante il necessario equilibrio che il legislatore deve trovare nel conferire autonomia e nel garantire la responsabilità politica dell'autorità regolatrice del mercato.


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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