Dimensions: 9'' x 6'' 136 pages AEI Press  (Washington) Publication Date: March 2001 Paperback ISBN: 0-8447-4122-1 Price: $ 16.95 Add to Cart   Hardcover ISBN: 0-8447-4121-3 Examination Copies

January 2001
Reviving Regulatory Reform: A Global Perspective
By Robert W. Hahn

Regulatory policy is currently undergoing a facelift, with policymakers calling for a more stringent review of how proposed regulations would affect people and businesses. Reformers want to see laws enacted that are not mired in hidden costs, excessive paperwork, and counterproductive provisions. This book assesses the current state of regulation in the United States and abroad and looks at the prospects for this critical aspect of public policy.

Robert W. Hahn is the director of the AEI-Brookings Joint Center for Regulatory Studies, a resident scholar at AEI, and a research associate at Harvard University.

Regulatory policymaking is in the midst of a revolution. Scholars and lawmakers no longer happy with the status quo are questioning existing regulation and floating daring new proposals on how to fix the system. Policymakers are engaged in a thorough reexamination of the nation's regulations in an effort to rein in a complex system that is overburdened with paperwork and hidden costs.

The notion that regulations could be more effective is gaining steam not only in the United States but in other countries as well. The governments of Mexico, Britain, and Australia, for example, are all seeking new and better ways to streamline regulations as they privatize their economies.

The sea change in regulatory reform is due in large part to a growing awareness of the relative costs and benefits of regulations and their impact on individuals and businesses. Many policymakers, including the author of this book, are calling for more rigorous governmental review of the potential impact of new regulatory laws before they are enacted. The author's study of federal regulations enacted in the United States between 1981 and the middle of 1996 found that about half of the regulations would not pass a cost-benefit analysis.

Reviving Regulatory Reform examines 168 proposed and final rules from all of the major federal agencies and concludes that the agencies must do a better job of improving the quality of the regulatory impact analyses (RIAs). Although the RIAs--which were implemented as a result of presidential executive orders beginning with Ronald Reagan--force agencies to provide more information about proposed rules than ever before, they do not generally adhere to established principles of cost-benefit analysis and are not subject to an independent review.

This book proposes a twofold approach to reform: First, elected officials should be held accountable for the decisions they make in passing new rules, and second, thorough analyses of the potential economic impact of proposed regulations should be routine for rules that are designed to protect the public health and welfare.

While the net benefits of many current regulations are positive, the RIAs conducted by the agencies that write them are often poor and may do little to improve the quality of the regulations. If Congress and the White House are serious about regulatory reform, together they must insist on regulatory analyses that produce useful information about the eventual impact of federal rules.

The Global Regulatory Revolution

The regulatory revolution bears examination not just for its impact on national economies, but for its potential impact on international trade and investment--which will have greater importance with globalization.

The United States--where politicians from both major political parties are calling for reform--is at the forefront of the global regulatory revolution. Policymakers from opposite sides of the political spectrum hold surprisingly similar views on fundamentals, such as the paperwork overload that results from excessive regulation, as well as the number of counterproductive regulations currently in place.

Elsewhere in the world, governments are also working to curb the regulatory burden. Britain, for example, is conducting an exhaustive review of its regulations, and in Mexico the government is seeking to simplify regulations to make it easier for small and midsize companies to do business.

Regulation and regulatory reform are becoming "internationalized," meaning, on the one hand, that certain common elements exist in the regulations that are being enacted around the world and, on the other, that regulation in areas such as finance, labor, and the environment is increasingly likely to be subject to oversight by international bodies.

Other future trends for regulation include a decrease in economic regulation--such as the price and entry regulation of certain industries--and an increase in social regulation, such as rules affecting health, safety, and the environment. The increase in economic deregulation, which will occur as more politicians view it as a cost-effective way to promote growth, is likely to benefit the average citizen.

As economic regulation begins to fade, social regulation could become more prevalent, creating the potential for more burdensome regulations to clog the Federal Register. But if policymakers have learned anything from the current situation, the final rules that eventually become law will likely be more judiciously written, thus mitigating their negative effects.

But for that to happen, the executive and legislative branches have to engage in a smarter approach to reform. This could include rigorous examination of the potential impact of the rules and a more flexible approach to implementation. Governments and the public will certainly benefit from the result.