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date: 15 September 2019

The Future of Regulation

Abstract and Keywords

The financial crisis that led to a global recession in the first decade of the twenty-first century offers much potential for reconsidering the practice and study of regulation. Throughout this volume, the aspiration has been to present contributions that strengthen cross-disciplinary conversations across social science disciplines. Innovation often occurs on the boundaries and not the centre, as the centre is blinded by methodological and theoretical straitjackets that define or discipline a discipline. This cross-disciplinary scenario encourages regulation research to move outside the ‘comfort zones’ of established areas of investigation. A vision of greater cross-disciplinarity is likely to provide for innovative answers to the traditional questions in the study of regulation, and it is also likely to trigger its own questions. In that way, the study of regulation will be in an even better position to supply relevant answers to the concerns of the post-recession world.

Keywords: global recession, regulation, social science disciplines, innovation, post-recession world

25.1 Introduction

Much of this book is about change and the ways in which regulatory processes and policies are able to adjust to new circumstances. As if to emphasise that point, the world of regulation seems to have shifted seismically during the writing of this book—and in ways that few could have predicted. The financial crisis that commenced in 2007 brought with it a sea change in the politics of regulation, at least in the financial sector. Before that event, businesses and governments around the world were consistently focusing their thinking and initiatives on the need to move towards ‘lighter touch’ and lower‐cost regulatory techniques. Reducing red tape was seen as a top priority and many governments placed great emphasis on their positions in league tables of business‐friendly regulatory environments.

In the UK, the Financial Services Authority reflected such general concerns about the costs of regulation when it commissioned a major consultancy study on this topic in 2006 (Deloitte, 2006). In 2007, New York's loss of market share to the City of London was hailed as a triumph of ‘light‐handed’ and ‘principle‐based regulation’ that would strengthen London's status as a world financial centre. In (p. 614) 2008, concern with the overall cost of regulation led the anti‐EU pressure group, ‘Open Europe’ (2008), to complain that new regulations had cost the UK economy £148 billion in the decade to 2009 and that EU legislation had accounted for £107 billion of this. Gordon Brown played his part in damping down regulatory expectations when, on coming to power, he established the Risk and Regulation Advisory Council in order to encourage risk taking and the avoidance of propensities to ‘overreact’ to risks by introducing new and excessive systems of regulation (Risk and Regulation Advisory Council, 2008).

By 2009, such calls seemed increasingly out of tune. Commentators, the public and regulators argued that not regulating, or regulating too lightly, might involve costs liable to dwarf those cited in relation to ‘excessive’ regulation. The costs of historical under‐regulation and regulatory failure in just one sector—financial services—were becoming apparent. The credit crisis had impacted on financial services and the wider economy, and the International Monetary Fund had forecast, in April 2008, that financial losses stemming from the credit crisis might approach $1 trillion. By 2009, the Bank of America was putting the figure at $7.7 trillion. Surveys, moreover, suggested that nearly 80 per cent of people blamed the regulators for the crisis (Black, 2009).

As a result, the regulatory mood had shifted by the late 2008 and early 2009. Politicians, regulators, and interested commentators were discussing widespread reforms to the regulatory architecture for financial markets. The supposedly light‐handed approach towards the regulation of financial services in the UK was said to have played a significant part in the ability of Bernard Madoff's so‐called Ponzi‐scheme to defraud investors of up to US$65 billion. Similarly, blame for the collapse of the former insurance giant AIG was partly placed on the ‘lax’ provisions of the City (and partly on avoiding oversight by the US‐Office of Thrift Supervision) that allowed London‐based AIG traders to invest into the US sub‐prime housing market.1

By this time, the then (newly appointed) head of the UK Financial Services Authority, Lord Turner, was warning that approaches to light touch regulation needed to be changed in order to establish a sounder and more interventionist regime of regulation. On prior approaches, he commented: ‘[…] over‐regulation and red tape has been used as a polemical bludgeon. We have probably been over‐deferential to that rhetoric’ (Moore, 2008, and Turner, 2009). In February 2009 he was more blunt in telling the Commons Treasury Select Committee that the light touch approach of his predecessors had been ‘mistaken’ and that there was now a need to quell the ‘animal spirits’ of bankers (Hughes, 2009). Similar language was also used in the US Treasury's reform proposals for financial regulation (US Treasury, 2009).

The regulatory mood, it was clear, had changed significantly—and its implications went beyond the regulation of financial markets. However, despite this universal mood swing towards favouring ‘more regulation’, there was nevertheless (p. 615) considerable scope for debate and controversy as to what the direction of travel was supposed to be. For many observers, calls for ‘more regulation’ were based on desires to reassert control through more sustained oversight by public authorities. Such controls were to replace the ‘light handed’ regulation that had relied on voluntary information gathering and were to rely on ‘nudges’ rather than ‘sticks’. In other words, regulation was to become more distinct again—more rule‐bound and arguably also more distanced from the private sector, both in terms of resource‐intense oversight and attitudes towards such matters as remuneration packages for staff. Mooted regulatory escalations were to offer a higher emphasis on technocratic decision‐making, more resources for enforcement, and as a result, more ‘costly’ regulatory activities.

In contrast, others argued that the previous regulatory system, especially in financial markets, had been particularly weak in terms of encouraging professional conversations. The key problem, on such a view, had been a decline in professional regulation that had been replaced by an over‐reliance, if not an aping of private business practices. One key example of the closeness of regulators with those they regulated was the ‘revolving door’ that operated between regulators and those in the financial industry—a circumstance that had not merely allowed but had encouraged (and was seen to have encouraged) the toleration of those vulnerabilities that had been identified during pre‐meltdown times. As a consequence, the argument ran, the pressing need was to build a stronger professional army of regulators.

A third strand in the advocacy of ‘more regulation’ urged that proposals for more rigorous regulation were potentially helpful in the short‐term and were required to stabilise markets. The contention was that once ‘normality’ had returned, markets would (and should) resume their natural superiority over governmental activities. Indeed, ‘too much regulation’ would soon be argued to be a deterrent for the return of investor confidence, whilst also hindering innovation.

Finally, adherents to a fourth approach argued that regulation was as much the disease as the cure. ‘More regulation’ was arguably helpful to deal with the feeding frenzies of outraged publics, journalists, and politicians. Nevertheless, all attempts at ‘more regulation’ would inevitably fail, due to the superior intelligence and counter‐punching efforts of market participants. In fact, adherents to this approach highlighted that it had been the ‘innovative’ attempts by financial institutions to circumvent regulatory requirements that had led to the generation of over‐complex products that were to prove ‘toxic’ in the first place.

These debates, unresolved at the time of writing, are not just of interest for regulation aficionados who are eager to follow the daily headlines. Rather, these debates and events reflect on the practice and study of regulation more widely and draw attention not merely to those existing faultlines that had become more prominent as a result of the strain of crisis and slump, but also to a number of recurring debates in regulation and to key themes for the future of regulation (p. 616) beyond the short‐term. The competing views regarding the need for ‘more regulation’ as outlined above place a spotlight on the ongoing contests about regulation that have influenced the nature of regulation as field of practice and study over time.

Historians of the early 21st century will debate whether the ‘credit crunch’ will have the same impact on economic and political life as did the Great Depression of the late 1920s and early 1930s. They may well ask the same question with respect to developments in thinking about regulation. Back then, as part of the ‘New Deal’ agenda, regulation was designed to tackle the perils of economic depression and the subsequent aspirations to provide for conditions for competition to take place (see Eisner, 2000). Whatever understandings regarding the ‘financial crisis’ will eventually prevail, it can be said that the events of the last few years have flagged up key themes that are at the heart of the debates in this Handbook and have wider implications for the practice and study of regulation, in particular highlighting the importance attached to the study of dilemmas and trade‐offs (Lodge, 2008: 292).

At one level, the most recent arguments have centred on the strength and weaknesses of particular regulatory instruments. At the time of putting this Handbook together, questions have been raised regarding the failure of regulatory instruments in financial regulation. For example, the idea of ‘risk‐based regulation’, much promoted by British regulators and politicians alike to underscore the supposed advantages of London as a global financial hub, has been found to have failed on multiple scores.

  1. (1) It has been widely accused of having failed to identify the risks that were building up within the banking system.

  2. (2) Arguably more damningly, even where it did identify risks, it has been said to have been politically too weak to force any form of regulatory response in the face of concentrated political and industry resistance (arguing that issuing open warnings regarding systemic risks would harm ‘market confidence’).

  3. (3) Even more fundamentally, it has also been said to have signalled a failure of an individualist understanding of regulation, in which risk‐taking and failure are to be tolerated as long as that failure is not threatening to the wider system. Whether individual and system‐wide failure could be differentiated that easily was always questionable, but the financial crisis was said by many to have illustrated very transparently not only that perceptions of individual failure could quickly escalate into perceptions of system‐wide failure, but also that individual failure could no longer be regarded as an isolated event, given the inherently internationalised nature of the financial market system.

At a second level, contemporary events have highlighted the question of how regulation ‘travels’. Do regulatory strategies and instruments extend easily across domains or can they be seen as largely contained within single policy domains? And to what extent are regulatory strategies and instruments diffused and filtered (p. 617) by national contexts? Debates have centred on the extent to which the regulatory problems that had been diagnosed in financial markets had led to a contagion effect into other regulatory domains. Following the disasters of principle‐based and risk‐based regulatory techniques in the area of finance, it was increasingly asked whether related toolsets were also under pressure in other domains?

There is, for example, increasing recognition, now, of the considerable interdependence between the financial meltdown and wider policy goals, especially in relation to climate change. After the failure of markets and ‘light‐handed regulation’ in finance, growing attention has been paid to arguments that suggested that these tools would also fail in the area of environmental regulation—and that this would bring considerable consequences for future attempts at dealing with environmental problems.

In the area of utility regulation, too, the future direction of regulation has become widely debated. These debates have related to issues of ownership, but also to the regulatory instruments that are required to incentivise investment into long‐term capacity rather than short‐term efficiency gains through ‘asset sweating’. In the area of electricity, for example, these debates have highlighted the inherent complexity of the interdependence between political decision‐making, regulatory instruments and operator behaviour, whether this related to issues of generation capacity, the ‘portfolio’ of energy sources by technology or degree of security of supply, or the capacity of the transmission infrastructure.

Elsewhere, regulators have been dealing with the challenge of reconciling the political demand for faster broadband networks with the demand for low interconnection charges by network providers. At the same time, it has become difficult to imagine that a return to traditional modes of control would provide for functionally superior outcomes; for example, in the light of modern food production patterns, it is doubtful whether the traditional ‘sniff and poke’ meat inspection style would offer superior outcomes to contemporary hazard‐based approaches when faced by recurring food scandals across countries. Equally, how regulators are supposed to oversee the high‐speed world of technologically‐assisted transactions in the financial industry has similarly raised questions as to the viability of ‘increased oversight’ demands.

In short, the debates surrounding the future of regulation have become linked to a set of wider concerns with the problem‐solving capacities of the regulatory state—concerns that had emerged in the late 20th century across developed and lesser developed countries. These debates were shaped by an awareness of the limitations of traditional regulatory approaches, on the one hand, and the realisation of the limitations of the supposedly high‐intelligence ‘new’ regulatory approaches on the other hand.

At a third level, contemporary events have also drawn renewed attention to the long‐established debates regarding the boundary between ‘state’ and ‘market’ and to competing views regarding the importance and significance of ‘market failure’ (p. 618) and ‘government failure’. In other words, contemporary events have also focused attention on the adequacy of markets in general and the overall need for regulation to steer behaviours. Debates regarding regulatory strategies and instruments could be interpreted as signs of changing paradigms and re‐drawings of the boundaries between state and the economy. As has been said about the impact of the French Revolution, it is too early to tell (so we have to keep our heads). It is always easy to declare new paradigms and—under the influence of over‐confidence or hindsight—to point to the numerous signs that should have been interpreted as ‘red flags’. It is somewhat premature to predict the shifting of the boundary between ‘state’ and ‘market’, especially as the chapters in this volume highlight that regulation cannot be understood as operating in such distinct spheres of influence, but rather that regulation is about the inherent complexity and interdependence between state and market (also Hancher and Moran, 1989). Indeed, the challenge for the national practice of regulation continues to be the management of the tension between a heterogenous and highly differentiated society characterised by dominantly individualist preferences (i.e. with non‐redistributive preferences), and desires for more insurance against all forms of failure. How this tension can be dealt with, at what cost and by whom is likely to be one of the key regulatory challenges for the next decades.

Recession‐induced reflections on the future of regulatory activities have not been confined to the world of practice. Academics, however, could have been more prescient in the last decade or so than they were. Indeed, for some time, the academy has exhibited a tendency to be too fascinated with the description of the latest initiatives and regulatory tools rather than an inclination to engage in critical analysis. Similarly, too much confidence has arguably been placed in so‐called ‘alternative forms of regulation’, so that there has been an over‐playing of the potential problem‐solving capacities of self‐regulatory or market‐based systems. In the search for the ‘regulatory state beyond the state’, important questions regarding the capacities of these systems to develop standards, to enforce them, and to gather robust information might have been investigated further.

At the same time, as the chapters in this Handbook show, there is considerable evidence that scholars have not been asleep on the job, and that they have much to contribute to debates that will shape the future of regulatory activities across domains and social‐economic contexts. As the above chapters show, there has been substantial critical attention to the instruments of economic and social regulation, the particular biases of the regulatory state of the late twentieth century and the politics of regulation more generally. As we note below, it is not as if the debates of the past thirty years have lost their validity and relevance in a global slump. In contrast, there is a continued concern with the quality of regulation, in terms of establishing sufficiently robust systems of controls that do not impose red tape and high compliance costs.

(p. 619) Furthermore, the problems that arise when regulation operates at the national level but markets are global; when systemic risks are insufficiently attended to by regulators; and when key regulatory functions are delegated to private bodies such as credit ratings agencies are exactly the sort of issues of concern in the wider literature in regulation. How regulation—as a field for practice and study—responds to some long‐cherished ideas about markets will, moreover, require future study: notably given growing scepticism that markets are, at heart, naturally self‐regulating, and that markets are best seen as free‐standing rather than constructs of laws and regulations.

25.2 Looking Forward

In looking forward to the shape of post‐credit crisis regulatory approaches and agendas, the chapters of this book serve as a guide to the major challenges that regulators and others will have to meet with new levels of commitment. Thus, Chapters 2 and 3, by Cento Veljanovski and and Mike Feintuck respectively, serve to emphasise the need to move the economic theory of regulation forward in a manner that takes on board the ways in which markets are ‘constructed’ and which allows coexistence with social rationales for regulation. Karen Yeung's contribution on the regulatory state (Chapter 4) pinpoints the need to rise to the continuing challenge of securing democratic legitimation for the regulatory state at a time when there has been an explosion of concern about the state's increasing dependence on non‐state actors as well as markets and networks to deliver its policies, as citizens and politicians alike lose faith in the capacity of markets and networks of non‐state actors to provide adequate regulatory regimes.

In Chapter 5, Cento Veljanovski deals with a particular issue close to enforcement—the rules and procedures that have been and can be put in place to reduce wasteful attempts to ‘game the system’. Industry has a number of options it can use to influence regulation and the regulator such as bargaining, manipulation of information and publicity, and challenge in the courts. Regulators can also engage in strategic manoeuvres and gaming to achieve legitimate or sometimes illegitimate outcomes. This can range from the use of opaque rules and enforcement procedures, to more overt pressures which force those regulated to make significant and sometimes questionable concessions. Where possible, Veljanovski argues, industry will seek to influence regulation, and to exploit the latitude that the regulatory process allows to gain more favourable outcomes. Likewise regulators live in a world where the law is a broad brush and they have discretion to frame the rules and determine how they are enforced. In fact they are often given powers and duties to create the ‘rules of the game’ through (p. 620) their rulemaking powers and enforcement decisions. In this environment the use of strategic responses to regulation, and ‘gaming the system’ will be prevalent and the fight to resist this will be ongoing.

Colin Scott (in Chapter 6) considers debates regarding rules and standards within the post‐credit crisis world. This is a world in which the setting of standards is characterised by a diffusion of responsibility across national and supranational levels, state and non‐state organisations. He notes that such a diffusion places question marks against the traditional model of regulatory governance—which focuses chiefly on the role of state agencies—and he suggests that there is a need for a revised approach to evaluating the effectiveness and legitimacy of these more diffused regimes. He draws attention to the challenges of accountability associated with the emergence of a highly diffuse ‘industry’ for regulatory standard-setting.

Enforcement is, of course, a central aspect of regulation, and Chapter 7 by Neil Gunningham sets out an agenda for taking approaches beyond ‘punish and persuade’ through responsive regulation, meta‐regulation, and beyond. Specifically, it makes the case for regulation and enforcement to be designed using a number of different instruments implemented by a number of parties, and it conceives of escalation to higher levels of coercion, within a single instrument category, across several different instruments, and across both state controls and instruments applied by institutions and resources residing outside the public sector.

In similar vein, Cary Coglianese and Evan Mendelson explore, in Chapter 8, the degree to which regulatory systems move away from the central, state command model. They argue that all control mechanisms must, in the final analysis, promote self-regulation and they explore and contrast the potential of self‐regulatory and meta‐regulatory mechanisms. Tanina Rostain continues this examination of self‐regulation in Chapter 9 and highlights the modern challenge of sustaining professional self‐regulatory systems. She argues that efforts to uphold self‐regulation should be viewed as battles to maintain a ‘social trustee’ conception of professionalism in the face of accelerating market forces and technological innovation, new business rationalities, and the abandonment of client and social commitments.

On the particular issue of moving away from traditional modes of regulation and towards control through markets, David Driesen's Chapter 10 identifies a number of ongoing challenges. He notes that market‐based instruments have become increasingly important as neo‐liberalism has advanced and suggests that, though these instruments provide a cost effective way of realising environmental improvements, they depend on government design and enforcement for their efficacy. A concern that is shared across contributions is that such instruments are increasingly deployed in a complex context of multilevel governance and challenges multiply where market mechanisms traverse national boundaries.

Such talk of adapting regulatory systems to modern conditions raises the issue of measurement and the questions: How can regulatory success or failure be measured? In his Chapter 11, Jon Stern suggests that there are considerable (p. 621) difficulties to be overcome if satisfactory evaluations are to be produced. Evaluations are an art at least as much as a science—and ex post evaluations are always considerably strengthened by the existence of a pre‐decision option appraisal, such as a regulatory impact assessment. The growth in use of econometric techniques has complemented analytical case studies, but their scope is limited and they are not a substitute for case studies. Accordingly, the analytical case study approach needs to be continuously developed and improved—and this endeavour has to be combined with an understanding that regulatory evaluation is much more than just a technical issue. Such a challenge raises major political economy implications.

Rob Baldwin argues, in Chapter 12, that a positive future for ‘better regulation’ cannot be achieved in the absence of coordinated or coherent conceptions of the ‘better regulation’ initiative. As for the use and evaluation of different regulatory instruments, the way forward, he argues, demands a coming to grips with three main challenges. Conceptually there has to be greater clarity on the links between benchmarks for determining regulatory quality and the relevant regulatory outcomes that elective bodies establish. Strategically there is a need for more harmonious use of different regulatory improvement tools and a greater awareness of the propensities of different such tools to further certain objectives but, potentially, to undermine others. In relation to evaluation, it has to be accepted that the application of benchmarks is inherently contentious, that trade‐offs between different values and objectives have to be addressed, and that the ‘networked’ quality of modern regulation has to be dealt with in making assessments.

A particular mode of evaluating regulation is Regulatory Impact Assessment and this device brings with it a host of continuing challenges. In Chapter 13, Claudio Radaelli and Fabrizio de Francesco suggest that the underlying motivations for regulatory impact assessment provide for an ideal testing ground for theories of political control of the bureaucracy—notably those of bureaucratic dominance and those of political control. To achieve such ends, they argue, it will be necessary to carry out more theory‐grounded comparative research—a type of analysis that can usefully inform the debates on the regulatory state and constitutional change, as well as the normative appraisal of governance architectures.

Many contemporary debates on regulation centre on the concept of risk and, in Chapter 14, Julia Black suggests that risk currently plays four related roles in regulation: as an object of regulation; as a justification for regulation; as the basis for the construction of organisational policies and procedures; and as a framework for accountability and evaluation. Risk, moreover, is a concept that gives rise to numerous ongoing challenges. The highly politicised and contested nature of debates on risk, Julia Black stresses, poses governments with the problem of how to rationalise or stabilise decision‐making on questions such as: which risks to select for attention, how much attention to give them, of what nature, and who should be involved in making those decisions. These problems are enhanced when the normative boundaries of the state are themselves defined in terms of risk. (p. 622) Furthermore, framing policy in terms of risk has significantly boosted the cause, and extent, of public engagement. However, public participation can itself be destabilising and can run counter to the rationalising attempts manifested in risk policies and procedures.

Issues of accountability have been a traditional feature in regulatory debates, affecting regulation as a field of practice and study. For Martin Lodge and Lindsay Stirton (Chapter 15), the long‐standing concerns with the accountability of non‐majoritarian institutions and encouraging participation in decision‐making are only side‐aspects of the debate (issues that also link to concerns raised by Julia Black, as noted earlier). Instead, they argue that debates regarding accountability and transparency should move beyond a ‘state‐centric’ and institution‐driven perspective. Instead they propose four different worldviews of accountability and transparency—all of which have distinct implications for institutional design. Viewing debates regarding accountability in regulation in this way, they suggest, also shifts attention towards the quality rather than the mere existence of formal accountability mechanisms and the identification of various approaches' prerequisites and limitations.

In their chapter on the role of regulation and development (Chapter 16), Antonio Estache and Lain Wren-Lewis point to many cross‐cutting themes in this volume, especially in terms of evolving economic approaches towards regulation. For one, they highlight the particular analytical dimension that the field of development has brought for the field of regulation, especially in the area of network (infrastructure) regulation. This contribution is particularly prominent with regard to the concern with the interplay between establishing ‘credible commitment’, institutional capacities, and differences in terms of national institutional endowment. They also point to distinct sectoral and regional patterns and emphasise that ‘one size fits all’‐prescriptions of regulatory approaches is likely to prove counterproductive.

Chapter 17, by Mathias Koenig‐Archibugi focuses on the regulatory consequences of ‘global’ policies and addresses some of the most intensely debated questions about the global factors that may be relevant to regulation. The chapter argues that several crucial questions raised by global regulatory cooperation remain open. One of the most important concerns the way public and private actors interact in the regulation of transnational issue areas, another concerns the interplay of various governance arrangements and the role of ‘regime complexes’. Important questions such as these, it is contended, are unlikely to disappear from the research agenda of students of global governance, but often the most persuasive answers will come from fine‐grained analyses that apply plural methodologies and context‐specific conditional hypotheses to carefully constructed datasets and/or in‐depth process‐tracing and analytical narratives of the vicissitudes of particular regulatory initiatives.

Moving to the discussion of distinct policy domains, in Chapter 18, Niamh Moloney focuses on the particular challenges and risks of regulating financial (p. 623) services and markets. She suggests that what marks out this regulatory area is the significant level of risk involved in the regulatory project. As for ongoing challenges for regulators, these are said to be severe in the wake of the credit crisis and numerous issues have to be dealt with. Thus, conflict of interest and incentive misalignment risk is persistent and appears to mutate along with market developments and to outpace regulation. Gatekeeper failure, particularly with respect to auditors and analysts, is a further worry as is the capacity of rating agencies to assess structured credit risks correctly. Disclosure has been shown to be a troublesome technique as has market discipline and the outsourcing of regulation to internal risk management models and processes.

In Chapter 19, Janice Hauge and David Sappington consider how regulators set prices in network industries. Traditionally this was done by setting prices to end users for services produced by a vertically integrated electricity, postal, telecommunications, or water company; prices being set either on the basis of costs incurred or, latterly, via a process of incentive regulation which gives firms an incentive to reduce costs over time. However, more recent regulation has switched the focus to allowing entry by competitors into potentially competitive parts of the value chain, and permitting such entrants to buy access to the incumbent's monopoly infrastructure. Hauge and Sappington review the principles for setting such network access prices adopted in the energy and telecommunications market places, and discuss their effects. An alternative approach is to encourage pricing agreements negotiated between providers and purchasers of such wholesale network services.

Chapter 20 by Peter Alexiadis and Martin Cave complements the previous chapter by discussing a regulatory issue encountered in the same network industries in those activities where there is potential for the development of competition. Examples are electricity generation, sewage treatment, long distance telecommunications services, and retailing. The question arises as to when traditional price regulation can give way to reliance on competition law. The trend in many countries, and especially in telecommunications in Europe, has been to move to ‘deregulate’ in this way. The authors examine how such decisions are made and how well competition law works in such contexts.

In Chapter 21, Jürgen Feick and Raymund Werle deal with the regulation of cyberspace and suggest that the challenges of regulation in this area are partly reminiscent of those in other regulatory domains and partly new ones. This newness is due to the opportunities that the new technologies provide to actors and which allow them to act in very different ways—as regulators or as regulatory targets. A significant point in this field is that the distinction between those who regulate and those who are regulated can become blurred because public regulators increasingly, and more so than in other regulatory domains, depend on the co‐operation of regulatees or regulatory intermediaries, if public intervention is to be effective. The continuing challenge in this field is liable to centre around the norms, rules, and regulations governing this complex and dynamic space and the ways in (p. 624) which these are influenced by a variety of factors, parties, interests, institutions, and forces. All of this contest will take place in an international environment, a fact which further complicates rule making and rule enforcement.

The pharmaceutical industry is the focus of Chapter 22 in which Adrian Towse and Patricia Danzon look at the special challenges of regulating in the face of such factors as poor observability of efficacy, high dangers of moral hazard, and the potential exclusion from desirable services of those who lack wealth. In response to the need for private sector investment in drugs and vaccines to treat Less Developed Country‐only diseases, the advantages and disadvantages of ‘push’ and ‘pull’ subsidy proposals are considered.

In Chapter 23, Catherine Mitchell and Bridget Woodman illustrate many of the debates regarding the problem‐solving capacity of the regulatory state that have been noted in other chapters. Focusing on the area of sustainable energy systems, they highlight that inherent conflicts between policy and regulatory objectives, especially in an area that seeks to incentivise investment, (supposedly) achieve goals in terms of climate change commitments and enhance efficiency. Mitchell and Woodman point to the tensions that arise between levels of government as well as in terms of allocation of decision‐making authority between government departments and supposedly independent regulatory agencies.

Finally, regulation within government is scrutinised in Chapter 24. Martin Lodge and Christopher Hood question whether accounts, put forward over three decades ago and suggesting that governments were unable to regulate themselves, are still able to offer much leverage over the contemporary regulation of government by itself. The chapter suggests that past commentators may have been rather too optimistic about the ease with which government could regulate the private sector and that Wilson's classic ‘client politics’ analysis of the conditions that lead to capture of business regulation by the regulatees seems to apply every bit as much to the regulation of private providers of public services as it does to public bureaucracies of the traditional type.

25.3 Conclusion

The financial crisis that led to a global recession in the first decade of the twenty‐first century offers much potential for reconsidering the practice and study of regulation. It will not suffice to declare the past as forgotten and as a failure, and to move on to the next trick. In the Introduction, we noted our aspiration that this Handbook would support the building of an increasingly transdisciplinary (p. 625) conversation across the social sciences. So what is the future for the study of regulation as transdisciplinary endeavour for the next thirty or so years?

One future could be characterised by a withering away of an interest in regulation. Such scenario is not unlikely as academic fashions, funding opportunities, and slogans do change. Interests in regulation could shift to other concerns that are more likely to align with the new issues that are in vogue with research fund managers or likely to spawn the inevitable journal. However, the centrality of regulation in contemporary policy debates, noted at the outset of this chapter, should provide sufficient motivation and inspiration to prevent such a withering away from occurring. In fact, as noted in the Introduction (see also Moran, 2002), the search for technocratic and regularised decision‐making which provides for the inherent appeal of the language of regulation has been a recurring feature across time, and therefore is unlikely to fade. Similarly, the inherent issues involved in the study of control, whether this involves the governmental, economic, or social worlds, are unlikely to wither away (unless the contemporary recession triggers the path towards a utopia as pictured in William Morris' News from Nowhere).

A more likely scenario is the continued critical engagement with such issues across the social sciences, with a renewed and sharpened emphasis on the potential limits of market and government‐based forms of regulation. In other words, contemporary events—such as the widespread nationalisation of banking sectors, the substantial state aid paid to various industries and the strains of dealing with multilevel, international problems—offer the analysis of regulation not just a convenient set of new cases that are ripe for study. These events encourage a critical reflection on past developments, on regulatory approaches and on the overall resilience of the regulatory state as it emerged in the late 20th century outside North America (see Majone, 1997). Such a scenario would follow the path of ‘normal science’ in that we, in a marginal fashion, know more and more about arguably less and less. Research in regulation would converse across the disciplines, but would ultimately still be shaped by the concerns, methodologies, and pre‐occupations of different disciplines.

Handbooks as expressions of the state of the art of a particular area of study are motivated by three different rationales. One is to state the ‘latest’ thinking within a pre‐defined discipline, whether this is in, for example, law, political science, economics, or sociology. A second is to use the Handbook vehicle as a tool to encourage cross‐cutting discussions across disciplines that previously have remained distinct and unconnected. A third rationale is to use Handbooks for bringing together a defined field of study that draws on different disciplines and therefore contributes to a greater cross‐disciplinary understanding of the field. This particular Handbook of Regulation principally follows this third rationale. Throughout the volume, the aspiration has been to present contributions that strengthen cross‐disciplinary conversations across social science disciplines. Innovation often occurs on the boundaries and not the centre, as the centre is blinded by methodological and theoretical straitjackets that define or discipline a discipline.

(p. 626) This cross‐disciplinary scenario encourages regulation research to move outside the ‘comfort zones’ of established areas of investigation, whether this is through the use of diverse methodologies or through the utilisation of cross‐disciplinary concerns. In view of the institutional persistence of traditional disciplines (especially through the linkage between career and publication) as well as the inherent difficulties of conducting genuine cross‐disciplinary work, it will be even more difficult to move towards a world of true interdisciplinarity or to create a ‘discipline’ of regulation. A vision of greater cross‐disciplinarity is likely to provide for innovative answers to the traditional questions in the study of regulation, and it is also likely to trigger its own questions. In that way, the study of regulation will be in an even better position to supply relevant answers to the concerns of the post‐recession world.

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Notes:

(1.) ‘AIG in the derivatives spotlight’, Financial Times, 13 April 2009.