Reviews concerned with the performance of regulation, rather than merely assessing procedural or compliance matters, will generally need to address four key questions.
Appropriateness: reviews should address as a threshold question whether a valid rationale for regulating still exists.
In assessing the performance of a regulation or regulatory regime, it is important firstly to determine whether the original policy logic justifying it still stands, given changes that may have subsequently occurred in policy frameworks, the economy or society. In cases where the rationale was not made clear at the outset – a not infrequent occurrence – this may require the reviewer to determine what it should have been, or at least what it should be going forward.
A commonly cited rationale for regulating comes under the rubric of “market failure”, where features inherent to some markets, such as asymmetric information or externalities, can lead to inefficient economic outcomes that may be ameliorated through government intervention. Other legitimate policy rationales include achieving more equitable outcomes (for citizens or regions) than markets would produce, or enhancing opportunities for citizens through better access to basic services such as education and health.
Effectiveness: reviews should determine whether the regulation (or set of regulations) actually achieves the objectives for which it was introduced.
Regulation is not of value for its own sake. It is (or needs to be) predicated on the expectation of it addressing a policy issue or problem so as to improve things. It is therefore fundamental in reviewing the performance of regulations in place that outcomes in the policy area of concern are assessed relative to what otherwise would have occurred. That is not to suggest that this is easy to achieve, given that there will often be multiple influences on observed outcomes over time, but without this as the objective, it will be harder to identify enhancements and build public confidence in regulation itself.
Efficiency: reviews need to determine whether regulations give rise to unnecessary costs (beyond those needed to achieve the policy goal) or have other unintended impacts.
The overall benefits to society of regulation need to account not only for its effectiveness in addressing a public policy issue, but also the costs and other impacts incurred in doing so (OECD, 2012[1]). Improved outcomes in a particular domain, for example reduced city congestion, may not be worth having if the cost of achieving these leads to worse outcomes elsewhere. A good regulation would achieve its goal at minimum cost and without leading to unintended adverse outcomes as a side effect.
Alternatives: reviews should consider whether modifications to regulations, or their replacement by alternative policy instruments, are called for.
An ex post review is of little value if it does not either affirm that a regulation is performing well and needs no change, or identify changes that would improve its performance. It is thus important that reviews be required to make recommendations about any changes considered beneficial. Consideration also needs to be given to how recommendations can be most effectively put into effect.