Understanding Regulatory Innovation: The Political Economy of Removing Old Regulations Before Adding New Ones

27 Pages Posted: 22 Aug 2017

See all articles by Robert W. Hahn

Robert W. Hahn

Technology Policy Institute; University of Oxford, Smith School

Andrea Renda

Centre for European Policy Studies (CEPS); College of Europe

Date Written: August 19, 2017

Abstract

During the last decade, governments have shown increasing interest in curbing the growth of regulation by requiring that one or more regulations be removed before a new regulation can be added. We provide a comprehensive review of this innovation in regulatory policy. There are three main conclusions that flow from our analysis: First, while some governments claim this policy has made regulatory agencies more sensitive to regulatory costs, none of the countries we review has demonstrated that this policy innovation has actually led to improvements in economic efficiency. Second, all of these policies are implemented in conjunction with a requirement related to the economic impact of regulations. Typically, the economic requirement is that the costs associated with the new regulation be less than the costs associated with the regulations being removed. For existing applications, these costs have been defined narrowly, and they do not provide a good measure of the full social costs of a policy. The US appears to be adopting a markedly different approach that will consider both economic costs and benefits. Third, we find support for the hypothesis that centrist or conservative political parties are more likely to implement these policies. We argue that the requirement to remove one or more new regulations before adding a new regulation is best understood in terms of symbolic politics.

Keywords: Innovation, Law and Economics, Regulation, Political Economy, Benefit-Cost Analysis, Administration

JEL Classification: D02, D73, H1, K2, L5, O43, P16

Suggested Citation

Hahn, Robert W. and Renda, Andrea, Understanding Regulatory Innovation: The Political Economy of Removing Old Regulations Before Adding New Ones (August 19, 2017). Available at SSRN: https://ssrn.com/abstract=3022552 or http://dx.doi.org/10.2139/ssrn.3022552

Robert W. Hahn (Contact Author)

Technology Policy Institute ( email )

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Suite 505
Washington, DC 20005
United States

University of Oxford, Smith School ( email )

Oxford
United Kingdom

Andrea Renda

Centre for European Policy Studies (CEPS) ( email )

1 Place du Congres
Brussels, 1000
Belgium

HOME PAGE: http://www.ceps.be

College of Europe ( email )

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B-8000 Brugge, Oost Vlanderen 10000
Belgium

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