To Regulate or Not To Regulate

To Regulate or Not To Regulate

Regulation

Regulation refers to the state's attempts to monitor (and thus direct) conduct. It gives rise to rules that structure the behavior of individuals and groups in a state's domain. As we will see, some observers believe that the new governance has brought the rise of a new regulatory state and perhaps also a new emphasis on self-regulation.

The term 'regulation' appears in various contexts. Nonetheless, most uses of the term share a common structure: a subject (e.g. the state or a specialized agency) regulates an object (e.g. the economy, firms, or citizens) by means of certain instruments (e.g. laws or norms). In political economy, the state can impose specific rules to govern the micro-level conduct of firms and individuals, or, alternatively, the state can make broad adjustments to macro-level policy instruments such as taxation and interest rates (Jordana, 2004). In public policy, the state can promulgate targets or rules in an attempt to ensure policy actors conduct themselves in certain ways or move towards certain goals.

Context

The crisis of the state in the late twentieth century encompassed the then-leading styles of regulation. Worries about state overload and inefficient bureaucracies eroded faith in state control. Neoliberals tried to roll back the state, restricting its regulatory presence in the economy. They promoted not only privatization but also liberalization. To some extent the result was a deregulation of large parts of the market economy, most notably including financial services. Yet, even neoliberals often wanted the state to be able to steer these deregulated bits of the economy or at least to oversee them so as to prevent market failures and abuses. Hence the state set up a range of new regulatory authorities to govern sectors such as finance, transport, and telecommunications.

The result of neoliberal reforms was thus the rise of a complex network of regulatory authorities and mechanisms as an alternative to older, more hierarchical forms of state control. Some commentators evoke the concept of a regulatory state to refer to this shift towards indirect modes of state steering. Many developed states have set up all kinds of new regulatory agencies and mechanisms. The states only have direct control over the regulatory agencies, leaving them to oversee individuals and corporate groups (John, 2000).

Self-regulation occurs when those to whom regulations apply are also responsible for devising, maintaining, and enforcing the regulations. It generally refers, therefore, to non-governmental regulations established by voluntary and private sector actors, often as an alternative to governmental regulations. Chemical firms across the world have set up, for example, a Responsible Care Initiative, under which they agree voluntarily to abide by certain standards for emissions and operations. Similar cases of self-regulation appear to have become increasingly prevalent - perhaps because of rising public discontent with the perceived limitations of state regulation (Freedman, 2003).

Issue

Enron emerged as a pipeline company, whose major operations included buying gas and power from the producers and supplying them to the consumers. The fluctuation of prices and increased usage ...