Caught in quicksand? Compliance and legitimacy challenges in using regulatory sandboxes to manage emerging technologies

Regulatory sandboxes have become the latest development in regulatory reform, starting first in financial regulation and now expanding to other sectors. While sandboxes offer notable potential benefits for managing emerging technologies, achieving desirable policy outcomes with this novel regulatory instrument also comes with technical and political challenges. This article offers a framework to characterize regulatory sandboxes in any sector, involving a blend of (1) approval regulation with broad-based standards, (2) restricted discretion by the regulator for specific norms, (3) process-oriented regulation, (4) an outcomes-orientation, and (5) structured regulator–regulatee information sharing or dialogue. Using this model, the article outlines issues in compliance and legitimacy, including in trust and accountability, responsive enforcement, the politics of participation, and post-sandbox oversight. The article concludes by calling for greater scrutiny when considering implementing a sandbox instrument, with attention to sector-specific concerns, and offering directions for empirical evaluation of regulatory sandboxes.     

How did international economic regulation survive the last period of deglobalization?

As trade wars and protectionism again present severe challenges and obstructions to international economic regulatory organizations (IEROs), it is timely to ask how their predecessors survived the last deep deglobalization of the interwar years. This article presents a fresh neo-Durkheimian institutional explanation. It highlights contrasting pathways to survival and bequest of IEROs in three fields of regulation – international infrastructure, capital and labor, and commodities. Our explanation shows that functional imperatives and short-term market pressures in these different areas of regulation facilitated specific forms of social organization within IEROs (such as hierarchy or individualistic brokering). These contrasting forms of social organization cultivated distinct regulatory styles during deglobalization and cultivated capacities for contrasting survival and bequest strategies. Our approach is thus able to account for variation in pathways to survival in a way that other possible explanations, such as theories of regulatory capture or bureaucratic autonomy, cannot.     

Regulatory impact assessment and regulatory governance in developing countries

Regulatory impact assessment (RIA) offers the means to improve regulatory decision‐making and practice. RIA involves a systematic appraisal of the costs and benefits associated with a proposed new regulation and evaluation of the performance of existing regulations. So far, the adoption of RIA has been confined mainly to OECD countries. The purpose of this article is to assess the contribution that RIA can make to ‘better regulation’ in developing countries. Results from a survey of a small number of middle‐income countries suggest that a number of developing countries apply some form of regulatory assessment, but that the methods adopted are partial in their application and are certainly not systematically applied across government. The article discusses the capacity building requirements for the adoption of RIA in developing countries, in terms of regulatory assessment skills, including data collection methods and public consultation practices. The article also proposes a framework for RIA that can be applied in low and middle‐income countries to improve regulatory decision‐making and outcomes. Copyright © 2004 John Wiley & Sons, Ltd.     

The relationship between regulation and contracts in infrastructure industries: Regulation as ordered renegotiation

This paper discusses the relationship between regulation and contracts in infrastructure industries and the role of regulation, particularly the role of regulatory agencies in the review, revision, and renegotiation of contracts. The paper starts with a short survey of relevant economic and legal issues. Examples are presented of how and why infrastructure contracts, including concession contracts, have been combined with monitoring and enforcement by external regulatory agencies. The examples discussed include historical UK experience, recent French experience, and developing country experience. The paper concludes with a discussion of the role that regulatory entities can play to reinforce trust and sustain contracts by enabling simpler contracts, resolving contract misunderstandings, and providing processes for ordered renegotiations.     

Designing Regulation Across Organizations: Assessing the Functions and Dimensions of Governance

In recent years, regulation scholars and policymakers have increasingly turned their attention to the role of inter-governmental organizational design in effective governance. The existing literature on regulatory design has provided important insights into the advantages and disadvantages of alternative structural options. This article synthesizes and builds on that literature by describing a novel framework for characterizing, analyzing, and structuring authority across public institutions. Drawing on examples from a range of jurisdictions, it highlights the value of this framework in identifying the values tradeoffs that should drive policymakers' decisions to choose among competing structural alternatives. The framework is founded on two important points. First, inter-governmental allocations of authority can be structured along three different dimensions. Failing to appreciate the existence of, and differences among, these dimensions can prompt misassessments of the reasons for existing regulatory failures and selection of structural allocations that do not suit the problems intended to be addressed. Second, allocations of authority can, and in many cases should, vary for disparate governmental functions. Differential functional allocations of authority can minimize obstacles to needed structural reforms and tailor inter-governmental relations in ways that best promote chosen regulatory values, such as efficiency, effectiveness, and accountability, as well as how allocational choices may and perhaps should vary depending on the governmental function being performed. Finally, the article suggests how future regulation and governance scholarship can harness this emerging framework to help build a body of empirical evidence upon which policymakers can draw in future regulatory design endeavors.     

Debt in just societies: A general framework for regulating credit

Debt presents a dilemma to societies: successful societies benefit from a substantial infrastructure of consumer, commercial, corporate, and sovereign debt but debt can cause substantial private and social harm. Pre‐crisis and post‐crisis solutions have seesawed between subsidizing and restricting debt, between leveraging and deleveraging. A consensus exists among governments and international financial institutions that financial stability is the fundamental normative principle underlying financial regulation. Financial stability, however, is insensitive to equality concerns and can produce morally impermissible aggregations in which the least advantaged in a society are made worse off. Solutions based only on financial stability can restrict debt without accounting for the risk of harm to persons least able to bear the risk, worsen preexisting inequalities, destroy or impair the net worth of households, and impose unfavorable distributive consequences. This article offers a new approach to assist policymakers in developing and evaluating regulation to take criteria in addition to financial stability into account, but which do not undermine the aim of financial stability. It calls for a luck egalitarian approach, offering policymakers options to take the debtor's choices into account while still accounting for cognitive mistakes people often make in debt decisionmaking. It offers a general framework for the underlying principles for the regulation of debt: its focus is not on any particular forms of debt or its regulation but in structuring debt regulation more generally. It offers a set of recommendations on how regulators can take concerns about luck and equality into account in regulatory design.     

Toward the usable recognition of individual benefits and costs in regulatory analysis and governance

Regulatory agencies in the United States and Europe have well‐deserved reputations for fixating on the total benefits and costs of proposed and final regulatory actions, without doing any more than anecdotally mentioning the subpopulations and individuals who may bear disproportionate costs or reap disproportionate benefits. This is especially true on the “cost” side of the cost–benefit ledger, where analysts exert little effort to even inform decisionmakers and the public that the costs of regulations might be distributed either regressively or progressively. Many scholars and advocates have observed that regulation can increase the efficiency of market outcomes, but caution about its untoward (or suboptimal) effects on equity. Here, we argue that without considering distributional information about costs and benefits, regulatory policies in fact can also cause violence to notions of efficiency, for two reasons: (i) society cannot hope to approach Pareto‐efficient outcomes without identifying those who must lose so that others can gain more; and (ii) because the harm experienced by involuntary risks and by imposed regulatory costs is likely non‐linear in its magnitude (at the individual level), efficiency is, in fact, a strong function of the shape of the distribution of these effects. This article reviews evidence about the distribution of regulatory costs and benefits, describes how agencies fail to incorporate readily available distributional information, and sketches a vision for how they could analyze costs and benefits to promote more efficient regulatory choices and outcomes.     

Developing Durable Infrastructures: Politics,Social Skill,and Sanitation Partnerships in Urban India1

Accelerated national and international efforts to redress the acute lack of infrastructures in the developing world have focused on forging partnerships to spur infrastructure development. This article finds a sore lack in attempts to grasp how infrastructures implemented through multiactor partnerships within entrenched, often volatile, political environments, become durable. Durability is understood here through field analysis, an approach common within the “new institutional” literature. Two case studies of sanitation infrastructure‐making from cities in India are presented as empirical evidence. Failure of the first case and the success of the second in acquisition of durability clearly illustrate the vital role political strategy plays in making infrastructures durable.     

Assessing the regulatory model for water supply in Jakarta

This article assesses the regulatory model for urban water supply services in Jakarta, the capital of Indonesia. Water supply services have been privately operated there since February 1998 after two companies—Thames PAM Jaya (TPJ), operating in Eastern Jakarta, and PAM Lyonnaise Jaya (PALYJA), operating in Western Jakarta—signed 25‐years concession contracts with the state‐owned Jakarta City Water Company (PAM Jaya). An independent regulatory body, the Jakarta Water Supply Regulatory Body (JWSRB) was established in 2001. The article compares the regulatory system in Jakarta with the French and English approaches to water regulation. It then assesses this regulatory system from the perspective of customers in order to assess how well customer protection, a central purpose of regulation, is being performed. The article concludes that although the essential regulatory mechanisms and activities are operating in Jakarta, the key regulatory role of customer protection is not being performed because customers do not perceive that they receive an acceptable level of water supply services. Copyright © 2008 John Wiley & Sons, Ltd.     

Adaptive governance for the Internet of Things: Coping with emerging security risks

The Internet of Things (IoT) is a disruptive innovation known for its socio-economic potential, but also for generating unprecedented vulnerabilities and threats. As a dynamic sociotechnical system, the IoT comprises well-known cybersecurity risks and endemic uncertainties that arise as IoT adoption increases and the system evolves. We highlight the impact of these challenges by analyzing how insecure IoT devices pose threats to both consumer protection and the Internet's infrastructure. While recent regulatory responses are starting to target IoT security risks, crucial deficiencies – especially related to the feedback necessary to keep pace with emerging risks and uncertainties – must be addressed. We propose a model of adaptive regulatory governance that integrates the benefits of centralized risk regulatory frameworks with the operational knowledge and mitigation mechanisms developed by epistemic communities that manage day-to-day Internet security. Rather than focusing on the choice of regulatory instruments, this model builds on the “planned adaptive regulation” literature to highlight the need to systematically plan for a knowledge-sharing interface in regulatory governance design for disruptive technologies, facilitating the feedback necessary to address evolving IoT security risks.     

India,Brazil, and public health: Rule-making through south–south diffusion in the intellectual property rights regime?

This article analyzes the domestic drivers of regulatory state formation in India and Brazil and its consequences for the global rules governing pharmaceutical patents. We first analyze Indian and Brazilian politics of regulatory state formation; then, in light of the extent to which the two countries have built regulatory capacity and capability in the field of patent regulation, we explore whether and how they have been able to influence the existing intellectual property regime in health. We look into India's Section 3(d) and Brazil's prior consent requirement. Whereas India's Section 3(d) regulation has gained international regulatory influence by diffusing to other developing countries, the same cannot be said for Brazil's prior consent regulation, which has been caught by policy-reversals. The transition toward regulatory states in emerging countries is a bulky road and does not progress in linear ways. However, once regulatory capacity and capability have been solidified, domestic policy innovations can become internationally influential.     

Withering in the Heat? In Search of the Regulatory State in the Commonwealth Caribbean

This article explores the “regulatory state hypothesis” in the context of electricity and telecommunications regulation in Jamaica and Trinidad and Tobago. This article questions whether institutional features associated with the regulatory state are triggered by a preference for efficiency and added complexity within the policy domain. This article progresses in three steps. After setting out the regulatory state hypothesis as derived from the work by Giandomenico Majone and its empirical consequences, the article explores the four cases in brief. Although the empirical evidence broadly supports the regulatory state hypothesis across domains, states and over time, some puzzles in terms of reform trajectories and extent of regulatory reform do emerge. The final section explores these puzzles through an actor‐centered institutional perspective. It is suggested that the “regulatory state hypothesis” may be useful for predicting institutional arrangements, but has difficulty in accounting for the extent of regulatory reform and timing.     

Understanding the rise of the regulatory state of the South*

This paper, and the special issue it introduces, explores whether, and how, the rise of the regulatory state of the South, and its implications for processes of governance, are distinct from cases in the North. With the exception of a small but growing body of work on Latin America, most work on the regulatory state deals with the US or Europe, or takes a relatively undifferentiated “legal transplant” approach to the developing world. We use the term “the South” to invoke shared histories of many countries, rather than as a geographic delimiter, even while acknowledging continued and growing diversity among these countries, particularly in their engagement with globalization. We suggest that three aspects of this common context are important in characterizing the rise of the regulatory state of the South. The first contextual element is the presence of powerful external pressures, especially from international financial institutions, to adopt the institutional innovation of regulatory agencies in infrastructure sectors. The result is often an incomplete engagement with and insufficient embedding of regulatory agencies within local political and institutional context. A second is the greater intensity of redistributive politics in settings where infrastructure services are of extremely poor quality and often non‐existent. The resultant politics of distribution draws in other actors, such as the courts and civil society; regulation is too important to be left to the regulators. The third theme is that of limited state capacity, which we suggest has both “thin” and “thick” dimensions. Thin state capacity issues include prosaic concerns of budget, personnel and training; thick issues address the growing pressures on the state to manage multiple forms of engagement with diverse stakeholders in order to balance competing concerns of growth, efficiency and redistribution. These three themes provide a framework for this special issue, and for the case studies that follow. We focus on regulatory agencies in infrastructure sectors (water, electricity and telecoms) as a particular expression of the regulatory state, though we acknowledge that the two are by no means synonymous. The case studies are drawn from India, Colombia, Brazil, and the Philippines, and engage with one or more of these contextual elements. The intent is to draw out common themes that characterize a “regulatory state of the South,” while remaining sensitive to the variations in level of economic development and political institutional contexts within “the South.”     

Modes of regulatory governance: A political economy perspective

This article introduces the special issue by presenting a framework for the study of regulatory politics using the analytical tools and approaches of comparative political economy. Having traced the evolution of studies on regulation, it argues that scholars should pay more attention to the systemic features affecting regulation and to the relationship between regulatory policies and their outcomes. The article presents the foundations of an analytical framework based on the “regulatory policy process,” a comprehensive approach that links inputs, outputs, and outcomes. The review of the contributions to this special issue shows that regulatory regimes can be better understood by placing them within the broader political economy of a state or region. A renewed focus on regulatory outcomes can help foresee what one should expect from the impact of a certain regulatory regime on a political‐economic system.     

Public orchestration,social networks,and transnational environmental governance: Lessons from the aviation industry

This article contributes to current debates on the potential and limitations of transnational environmental governance, addressing in particular the issue of how private and public regulation compete and/or reinforce each other – and with what results. One of the most influential approaches to emerge in recent years has been that of “orchestration.” But while recent discussions have focused on a narrow interpretation of orchestration as intermediation, we argue that there is analytical traction in studying orchestration as a combination of directive and facilitative tools. We also argue that a social network analytical perspective on orchestration can improve our understanding of how governments and international organizations can shape transnational environmental governance. Through a case study of aviation, we provide two contributions to these debates: first, we propose four analytical factors that facilitate the possible emergence of orchestration (issue visibility, interest alignment, issue scope, and regulatory fragmentation and uncertainty); and second, we argue that orchestrators are more likely to succeed when they employ two strategies: (i) they use a combination of directive and facilitative instruments, including the provision of feasible incentives for industry actors to change their behavior, backed up by regulation or a credible regulatory threat; and (ii) they are robustly embedded in, and involved in the formation of, the relevant transnational networks of actors and institutions that provide the infrastructure of governance. © 2017 JohnWiley & Sons Australia, Ltd     

混合型监管：政策工具视野下的中国药品安全监管

在当代中国,社会性监管正在被越来越多地运用到公共卫生、生产安全和环境保护等公共治理过程.以药品安全监管为个案,结合西方社会性监管的有关理论,从建章立制、设立标准、建立奖惩机制以及优化执行系统四个政策工具角度,对当代中国药品安全监管的政策过程进行分析,结果表明,由于受到社会治理模式转型的影响,中国药品安全监管模式可以被界定为"混合型监管".一方面,中国的药品安全监管政策在形式上已经具有了一些现代监管型政府的特点,例如建章立制、设立标准,并综合运用经济、法律和行政等手段;另一方面,却在许多方面仍然带有许多前监管型政府特征,而这些特征大都是计划经济时代的产物.虽然监管型政府正在逐渐取代全能型政府而成为未来中国政府可能的治理模式,但是从政策分析的角度来看,监管型政府的建设在中国并不是一蹴而就的.建设一个高效的现代监管型政府,仍然是市场经济时代下中国国家政权建设过程中的重要目标.     

A discounting framework for regulatory impact analysis

This article presents a methodology designed to facilitate the systematic comparison of alternative discounting procedures for the costs and benefits of industrial regulatory activity. A discounting framework developed by Bradford is adapted for use in the context of industry regulation. Within this framework, the choice among the various discounting procedures is reduced to a choice between assumptions about various economic and financial parameter values. As an illustration of the way in which the framework can be applied, the article includes an examination of the validity of parameter assumptions implied by the discounting approach currently used by regulatory agencies in their analyses of regulations affecting the motor vehicle industry. Several hypothetical programs are analyzed to demonstrate the broad differences in program treatment that might be expected if this current discounting approach were replaced by procedures generated within the framework from more reasonable parameter assumptions. Sensitivity of the benefit/cost calculations to uncertainty about underlying parameters is also briefly discussed.     

The effectiveness of NGO self‐regulation: theory and evidence from Africa

Non‐governmental organizations (NGOs) play an increasingly important role in public service provision and policy making in sub‐Saharan Africa, stimulating demand for new forms of regulatory oversight. In response, a number of initiatives in NGO self‐regulation have emerged. Using cross‐national data on 20 African countries, the article shows that self‐regulation in Africa falls into three types: national‐level guilds, NGO‐led clubs and voluntary codes of conduct. Each displays significant weaknesses from a regulatory policy perspective. National guilds have a broad scope, but require high administrative oversight capacity on the part of NGOs. Voluntary clubs have stronger standards but typically have much weaker coverage. Voluntary codes are the most common form of self‐regulation, but have the weakest regulatory strength. This article argues that the weakness of current attempts to improve the accountability and regulatory environment of NGOs stems in part from a mismatch between the goals of regulation and the institutional incentives embedded in the structure of most self‐regulatory regimes. The article uses the logic of collective action to illustrate the nature of this mismatch and the tradeoffs between the potential breadth and strength of various forms of NGO self‐regulation using three detailed case studies. Copyright © 2008 John Wiley & Sons, Ltd.