Regulation Is: Definition, Form, and Theory Around It

In social life, humans need an order that can guarantee individual and collective comfort and safety. Therefore, various regulations have been made that prioritize the public interest.

In simple terms, regulations are a collection of abstract instruments that are arranged into a single unit to guide the actions or behavior of society in relation to an issue. The rules require people to act voluntarily, but with responsibility.

Before becoming a full regulation, the regulator must go through a long process. The process mainly consists of formulating a problem, analyzing it and finding a solution. The first step that must be taken is to identify the things that are obstacles or obstacles for the community.

For more details, the following is DailySocial.id's explanation regarding regulations.

Regulatory Definition

For some people, achieving goals is not difficult. Without additional effort, they can use various means to achieve their goals. However, the other party faced many obstacles to achieve their goal.

To overcome this, according to Joseph Stiglitz, the state must protect vulnerable citizens through regulations. In the article Regulation and Failure, Stiglitz explained that regulation is essentially a limitation of what an individual or organization should do.

From an economic standpoint, government intervention through regulation is urgently needed to protect the market from possible failures and problems that can lead to an economic crisis.

When the market works efficiently, there is always a chance of failure. In addition, exploitative activities carried out by powerful entrepreneurs to maximize profits can harm society.

In this situation, precautions are in place to prevent potential damage from market imbalances.

Stiglitz adds that those whose behavior is severely restricted may complain or object that regulation tends to eliminate or reduce profits and negatively impact innovation.

The goal of ideal regulation, on the other hand, is to directly address the consequences of those involved in situations where private utilities do not have a good social impact.

Appropriate regulations can actually encourage innovation and improve welfare. Although the regulations seem to focus solely on preventing harm to people, some regulations are also made to encourage constructive behavior.

Strategy in Regulation

First Party Regulations

In first-party regulation, the primary form of regulatory control is self-regulation. In first-party regulation, we govern ourselves by the rules we set for ourselves. Therefore, the regulator (ruler) is also a regulator (enforcer of the rules).

Second Party Regulations

In the regulation of other parties, there is a division of labor in society, politics, business and management between actors and regulatory authorities. Regulators are independent parties, aren't they regulate e. Second party regulations often refer to, but are not limited to, government business regulations.

One example is company regulations. Here the growth of regulation is driven by the ability of some companies (mostly large companies) to set standards for other companies (mostly smaller ones).

Third Party Regulations

In third-party regulation, the relationship between the regulator and regulate e mediated by a third party acting as an independent or semi-independent monitor. The process and procedure for third party accreditation is one of the strategies for implementing these regulations.

There is a contractual relationship between the company and the third party being financed. Supervisory or regulatory authorities are only appointed as law enforcers. The most well-known example of third-party regulation is auditing.

Hybrid Regulatory Forms

Hybrid regulation is a regulation which in its formulation process involves various parties. Here are the various hybrid regulations according to Levi-Faur.

Co-regulation

First is co-regulation, where responsibility for regulatory design or enforcement is shared between the regulator and those who regulate, often state and civil actors, but may also be exercised between MaNGOs (Market actors Non-Governmental Organizations) and CiNGO (Non-Governmental civil society) and countries and MaNGO.

Enforced Self-Regulation

The second form of hybrid regulation is self-regulation which contains an element of coercion (enforced self-regulation), where the regulator forces regulate e to write a set of rules tailored to the unique set of contingencies that company faces.

Instead of governments enforcing the rules, regulators would assume most of the enforcement and cost responsibilities, and would have to set up their own independent administration of compliance.

Regulators can accept regulations submitted by regulators or send them back for review if they do not meet the criteria.

Meta-Regulation

The third form of hybrid regulation is meta regulation. Unlike enforced self-regulation, meta regulation allows regulate e to set its own rules. The role of the regulator is limited to institutionalization and oversight of the integrity of institutional compliance.

Multi-Level Regulation

Lastly, the hybrid form of regulation is referred to as multi-level regulation. Regulatory authorities are divided into territorial levels - supranational (global and regional), national, regional (domestic) and local. There are several types of tiered rules, depending on the different parties and the specific form of division.

Regulators can be functional (where regulators are divided into different levels based on how they can deal with problems) or hierarchical (where ultimate authority is assigned to one of the levels of regulation), or simply the result of additional processes. Much of the discussion on multilevel governance focuses on the transfer of power between levels.

Theory in Regulation

Bruce Yandle said that there are 5 theories that offer a regulatory framework related to the elements contained therein.

Public Interest Theory

The theory of public interest is the first and oldest regulatory theory and is not tied to any particular specialist or expert. This theory states that politicians and those who are systematically involved in regulation seek to serve the broad public interest.

They are always looking for cheaper ways to achieve the common good than prioritizing the interests of certain groups at the expense of the general public.

Capture Theory

The capture theory suggests that politicians and regulators face both costs and information problems: there is no clear definition of what could be in the public interest for any bill passed by parliament or rules enacted by regulators.

To address this, legislators and regulators meet with many advisors who are happy to recommend the best course of action for voting or acting on certain issues.

Special Interest Theory

The theory developed by Stigler explains that you can predict who will win a political contest by imagining the concrete content of a legal proposal only to the highest bidder in an auction.

Focusing on which side loses (or wins) the most in the competition, the basis for regulation can be understood.

Money for Nothing Theory

If the previous two theories emphasize political assistance obtained through the formulation of a regulation, theory money for nothing developed by Northwestern Law School Professor Fred S. McChesney instead focuses on lobbying done to gain profit through the threat of regulation.

Usually a group of businesses that are poorly organized, not yet subject to regulation, and make few campaign contributions to politicians will be targeted. In order for politicians to get the attention of companies or entrepreneurs with the above criteria, a politician makes an announcement that a hearing will be held about the possibility of calling for regulations regarding a matter.

Bootleggers and Baptist Theory

Bootleggers and Baptists (B&B) theory combines elements of the general interest theory and special interest theory. B&B theory explains how successful lobbying and sustained regulation came about when one interest group, called the Baptists, came into being

Taking over the moral foundations while another group, the smugglers, used the Baptists as a cover to pursue narrow economic goals.

For the theory to work, both parties must have the same end result, and neither party needs to communicate or even meet.