Managing Regulatory Risks and Defining the Parameters of Blame: A Focus on the Australian Prudential Regulation Authority

Risk-based regulation is a new arrival in the lexicon of risk and regulation. Regulators in Australia, Canada, and the UK have begun developing systems and processes to assess the probability and impact of compliance failures by regulated firms, and to adjust their relationship with firms accordingly. This article explores the motivations for, and key elements of, the risk-based frameworks of one of those regulators, the Australian Prudential Regulation Authority (APRA). It broadens out from this case study to argue first, that risk-based regulation goes hand in hand with the technique of "meta" regulation, the regulation of the firm's own internal self regulation, and will both fuel and be fueled by any trend towards the latter. Second, it argues that risk-based frameworks are not risk-free: whilst they seek to manage risks they inevitably introduce their own. Third, risk-based regulatory frameworks have the potential both to expose and obscure key sociopolitical and socioeconomic choices as to the amount or types of regulatory failures that an agency will tolerate, and which in effect it is requiring society to tolerate. "Risk based frameworks" are attempt to define what are acceptable "failures" and what are not, and thus to define the parameters of blame.     

INSTITUTIONAL LAYERING IN GOVERNING HEALTHCARE QUALITY

Since the 1980s, regulated markets and New Public Management have been introduced in the public sector across the world. How they have affected existing governance mechanisms such as self‐regulation and state regulation has remained largely unexplored, however. This article examines the origins and consequences of institutional layering in governing healthcare quality. Dutch health care, where a market‐based system has been introduced, is used as a case study. The results show that this market‐based system did not replace but modified existing institutional arrangements. As a result, hospitals have to deal with the fragmentation of quality demands. Using the concept of institutional layering, this study shows how different arrangements interact. As a consequence, the introduction of a certain policy reform will work out differently in different countries and policy sectors. Our ‘archaeological’ study in this layering can be seen as an example of how such incremental change can be studied in detail.     

Really Responsive Risk‐Based Regulation

Regulators in a number of countries are increasingly developing “risk‐based” strategies to manage their resources, and their reputations as “risk‐based regulators” have become much lauded by regulatory reformers. This widespread endorsement of risk‐based regulation, together with the experience of regulatory failure, prompts us to consider how risk‐based regulators can attune the logics of risk analyses to the complex problems and the dynamics of regulation in practice. We argue, first, that regulators have to regulate in a way that is responsive to five elements: (1) regulated firms' behavior, attitude, and culture; (2) regulation's institutional environments; (3) interactions of regulatory controls; (4) regulatory performance; and (5) change. Secondly, we argue that the challenges of regulation to which regulators have to respond vary across the different regulatory tasks of detection, response development, enforcement, assessment, and modification. Using the “really responsive” framework, we highlight some of the strengths and limitations of using risk‐based regulation to manage risk and uncertainty within the constraints that flow from practical circumstances and, indeed, from the framework of risk‐based regulation itself. The need for a revised, more nuanced conception of risk‐based regulation is stressed.     

The Professionalization of Public Accounting: A Social Dilemma Perspective

This study uses a social dilemma model of auditing and a model of cooperative regulatory enforcement to provide a framework within which the evolution of self-regulation in the U.S. accounting profession is studied. From a social dilemma perspective, individual public accounting firms are best off, in a single period sense, by providing a low quality audit product, which is defined in terms of the degree of auditor acquiescence to managers' accounting method discretion. However, firms' collective welfare is maximized by high quality auditing. The cooperative regulatory model employed is premised on the existence of a plausible government threat of punishments and invasive regulations, which motivates self-regulation in an industry. We argue that prior to enactment of the securities acts, public accounting firms faced a social dilemma in which there were limited incentives for high quality auditing either voluntarily or through the establishment of self-regulation. The securities acts provided a plausible threat to which the accounting industry responded by implementing self-regulation in order to avoid invasive and costly government regulation. After the emergence of the accounting profession, there occurred a long period of cooperative regulation with the SEC. Management discretion over accounting methods increased during this time period and audit quality correspondingly decreased, suggesting possible inefficient capture of the SEC. Evidence of an evolution towards a tripartite form of regulation appeared in the 1970s when the SEC and public accounting began to be critically reviewed by Congress. From this time to the present, new regulatory threats have motivated a series of self-regulatory responses by public accounting to improve audit quality.     

Convergence or divergence?: change in welfare effort in OECD countries 1960–1980

Abstract. This paper examines changes in welfare effort from 1960 to 1980 and two intervening periods. Analysis of data on 17 OECD countries indicates that there is increasing divergence in welfare effort, as reflected in expenditure and policy orientation, although this statement masks important nuances relating to measures of welfare effort and time periods. The findings illustrate the importance of considering the elements of welfare effort. The patterns of variation in social transfer and government civil consumption expenditure differ as do the explanations of these patterns particularly those relating to the impact of working class mobilisation variables. These variables are positively and relatively strongly associated with change in consumption expenditure in both the 1960–73 and 1973–80 periods but only weakly associated with change in social transfer expenditure. This has implications for findings relating to the widely used ILO measure of welfare effort. Since it is skewed towards social transfer payments and includes only a small part of consumption expenditure, the impact of working class mobilization variables is not evident. Finally, the standardization of change in welfare effort for average annual change in real GDP results in interesting insights relating to the impact of independent variables on 'real' as opposed to nominal change in welfare effort.     

‘Going institutional’ to overcome obstruction: Explaining the suppression of minority rights in Western European parliaments, 1945−2010

When and why do parliamentary majorities in Europe suppress parliamentary minority rights? This article argues that such reforms are driven by substantive policy conflict in interaction with existing minority rights. Government parties curb minority rights if they fear minority obstruction due to increased policy conflict and a minority-friendly institutional status quo. Empirical support is found for this claim using comparative data on all reforms in 13 Western European parliaments since 1945. A curbing of minority rights is significantly more likely under conditions of heightened policy conflict and these effects are stronger the more the institutional status quo favours opposition parties. Contrary to frequent claims of consensual rule changes from single-country studies in Europe, these findings demonstrate the importance of competitive strategies in explaining institutional reform in European parliaments. The conditional impact of the status quo provides interesting theoretical links to historical institutionalist arguments on path dependence.     

Flatliners: Ideology and rational learning in the adoption of the flat tax

What factors explain the wave of adoption of the flat tax in Eastern Europe? It is argued in this article that, once the first few successes were underway, governments with liberal outlooks toward taxation adopted the reform through a process of rational learning: an often radically new government will tend to adopt the policy based on successful implementation of its neighbours. The issue of policy diffusion is approached by explicitly modeling the different mechanisms that might underlie the process. Little evidence is found for pure ‘bandwagoning’ in the adoption of the flat tax – the presence of other market‐minded reforms do not predict adoption of the flat tax, and contagion measures do not capture the dynamics of the adoption of the reform. Instead, rational learning, where economically right‐wing governments evaluated the success of the reform (as measured by their ability to attract foreign investment) in the medium term, plays the largest role. Rational emulation in a shorter time period contributes to the probability of adoption as well, as does a change to an economically liberal ideology.     

The National Character of Ernest Barker's Political Science

This article considers the writings of Sir Ernest Barker (1874–1960). one of the first professional political scientists in Britain. It examines his background in Literae Hwnaniores and Modern History at late-Victorian Oxford, disciplines which respectively imparted the idealist and Whig framework of his later thought. It is argued that Barker's fusion of these two rival discourses - together with the concerns of early twentieth-century pluralism - reinforced powerful cultural motifs. As a consequence, the significance of political science Seems to have outstretched the academic boundaries in which it increasingly became confined after his death.