Regulatory Governance: History, Theories, Strategies, and Challenges

Regulation, that is, rulemaking, rule monitoring, and rule enforcement, is both a key policy and legal instrument and a pillar of the institutions that demarcate political, social, and economic lives. It is commonly defined as a sustained and focused control mechanism over valuable activities using direct and indirect rules. Most frequently, regulation is associated with the activity of public independent regulatory agencies, designed to promote economic, social, risk-management, integrity, or moral goals. Since the 1990s, more and more states worldwide are establishing such agencies and placing more emphasis on the use of authority, rules, and standard-setting, thus partially displacing earlier emphasis on public ownerships and directly provided services. Alongside this rise of the “regulatory state,” the expansion of regulation is also reflected in the rapidly growing variety of regulatory regimes that involves nonstate actors, such as private regulation, self-regulation, and civil regulation. Regulatory regimes can be explained and assessed from three theoretical perspectives: public-interest theories, private-interest theories, and institutional theories. Each perspective shines a different light on the motivations of the five regulatory actors: rule-makers, rule intermediaries, rule-takers, rule beneficiaries, and citizens. Over the years, diverse regulatory strategies evolved, including: prescriptive strategies that attempt to mandate adherence in precise terms what is required from the rule-takers; performance-based strategies that set in advance only the required outcomes; and process-based strategies that attempt to influence the internal incentives and norms of rule-takers. Although it appears that regulation is here to stay as a keystone of society, it still faces fundamental challenges of effectiveness, democratic control, and fairness.