I agree with you Peter that a careless deregulation blitz can lead to serous regulatory failure. I’m currently visiting the UK and the Grenfell tragedy that you mention is all over the media. Clear evidence of regulatory system failure there with terrible consequences. Yes, we have NZ examples, e.g. the leaky buildings you mention, although this was a case of replacing one form of regulation (i.e. prescriptive rules based) with another (i.e. goals based) rather than straight deregulation. For a contrasting example, NZ’s current GM regulation regime is arguably an example of poor or over-regulation that stymies innovation and productivity with no significant benefit in a lower risk of serious negative outcomes. Proposals both to regulate and deregulate need thorough scrutiny of potential benefits, costs and risks, and a regulatory regime, once in place, needs on-going monitoring and evaluation. The Productivity Commission’s 2014 publication “Regulatory institutions and practices” remains an exemplary source of advice in these matters. The new Ministry for Regulation has a key role in oversight of regulators and regulatory systems with a view to minimising the risks of serious regulatory failure while enabling desirable societal goals (those at risk of non-achievement without regulation). Safety, public health, freedom, privacy as well as productivity are common examples of such goals.
One thing I missed with this tutorial was an example. There must surely be examples of the impact of regulatory settings on various outcomes, of which productivity might just be one. For example, leaky buildings. It has been argued that could in part be attributed to the deregulation of products for the construction sector instigated in the 1990s. This has been brought home to us with the publication of the Grenfell Inquiry into the loss of over 70 lives in a social housing tower in London where cladding which should never have been attached caught fire and spread rapidly and in a deadly manner. The inquiry sheets home the blame to successive governments who never intervened, but more particularly to regulators and to the dishonesty of cladding providers (one of which was headquartered in France). The Key government tightened up health and safety following Pike River, but it is still striking that we hear about deaths due to quad bikes which remain outside compulsory regulation for protective roll bars (unlike tractors, although that may have been a manufacturer's intervention). And you have to wonder about the Commerce Commission. It is arguable that it has been stymied in encouraging competition in NZ markets by restrictions that have only recently been lifted to a degree. I note that Bayly is lifting restrictions in the lending market; stand ready for more indebted people queuing up at MSD to be "bailed" out. I am totally in favour of deregulation where that can be shown to contribute to the public good - for example, reducing restrictions on densification in urban environments - but this new Ministry will have to prove itself to the Minister and his constituency, and I fear that will create over-reach. A pity we lost the Productivity Commission!
Thanks Geoff, thats a really nice primer on the topic. I would probably emphasise (you do make the point clearly though) that regulation is far too often only reviewed through a fiscal lens -not an economic one, so it is easily mistaken as a "lower cost "intervention. Then of course, nobody thinks of the dynamic or cumulative effects either.
I agree with you Peter that a careless deregulation blitz can lead to serous regulatory failure. I’m currently visiting the UK and the Grenfell tragedy that you mention is all over the media. Clear evidence of regulatory system failure there with terrible consequences. Yes, we have NZ examples, e.g. the leaky buildings you mention, although this was a case of replacing one form of regulation (i.e. prescriptive rules based) with another (i.e. goals based) rather than straight deregulation. For a contrasting example, NZ’s current GM regulation regime is arguably an example of poor or over-regulation that stymies innovation and productivity with no significant benefit in a lower risk of serious negative outcomes. Proposals both to regulate and deregulate need thorough scrutiny of potential benefits, costs and risks, and a regulatory regime, once in place, needs on-going monitoring and evaluation. The Productivity Commission’s 2014 publication “Regulatory institutions and practices” remains an exemplary source of advice in these matters. The new Ministry for Regulation has a key role in oversight of regulators and regulatory systems with a view to minimising the risks of serious regulatory failure while enabling desirable societal goals (those at risk of non-achievement without regulation). Safety, public health, freedom, privacy as well as productivity are common examples of such goals.
One thing I missed with this tutorial was an example. There must surely be examples of the impact of regulatory settings on various outcomes, of which productivity might just be one. For example, leaky buildings. It has been argued that could in part be attributed to the deregulation of products for the construction sector instigated in the 1990s. This has been brought home to us with the publication of the Grenfell Inquiry into the loss of over 70 lives in a social housing tower in London where cladding which should never have been attached caught fire and spread rapidly and in a deadly manner. The inquiry sheets home the blame to successive governments who never intervened, but more particularly to regulators and to the dishonesty of cladding providers (one of which was headquartered in France). The Key government tightened up health and safety following Pike River, but it is still striking that we hear about deaths due to quad bikes which remain outside compulsory regulation for protective roll bars (unlike tractors, although that may have been a manufacturer's intervention). And you have to wonder about the Commerce Commission. It is arguable that it has been stymied in encouraging competition in NZ markets by restrictions that have only recently been lifted to a degree. I note that Bayly is lifting restrictions in the lending market; stand ready for more indebted people queuing up at MSD to be "bailed" out. I am totally in favour of deregulation where that can be shown to contribute to the public good - for example, reducing restrictions on densification in urban environments - but this new Ministry will have to prove itself to the Minister and his constituency, and I fear that will create over-reach. A pity we lost the Productivity Commission!
Thanks Geoff, thats a really nice primer on the topic. I would probably emphasise (you do make the point clearly though) that regulation is far too often only reviewed through a fiscal lens -not an economic one, so it is easily mistaken as a "lower cost "intervention. Then of course, nobody thinks of the dynamic or cumulative effects either.