Regulation 2.0: The Marriage of New Governance and Lex Informatica

Abstract

Throughout history, disruptive technologies have transformed industry and signaled the destruction or creation of regulatory structures. When crafting regulations, governments often utilize Regulation 1.0 approaches, characterized by top-down design standards that dictate exactly how the regulated must act in order to prevent market failures. Regulation 1.0 increases barriers to entry and decreases the room for business experimentation. Regulation 2.0, by contrast, is a theoretical approach for regulating companies that rely on platform-mediated networks. It marries New Governance theory and the concept of lex informatica. This marriage allows for the collaborative creation of design standards that are then enforced through mediating technologies. Regulation 2.0 is ideal for regulating the sharing economy in particular, as it is powered by technology-driven feedback loops. The shift from Regulation 1.0 to Regulation 2.0 will help regulators meaningfully collaborate with stakeholders and complete the heavy lifting required to effectively turn code into law and efficiently achieve the desired ends of regulation.

Keywords: Sharing Economy, New Governance, Regulation, Airbnb, Uber, Lex Informatica, Reputation Systems