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Rules have always been essential to sports, society and the economy. Regulation is the process of using rules. As with any process, a focus on efficiency pays off.
Big-time tennis nowadays settles disputed line calls with a tool called Hawk-Eye. In 10 seconds, the system’s computer reconstructs the ball’s flight from sets of camera data and shows the line and landing spot on the big screen. Fans cheer for the gee whiz verdict and tennis resumes.
In the old days, a close line call was the start of John McEnroe’s barking infamies at the chair umpire in three-minute-long tirades. Remember?
The McEnroe model still reigns in the regulatory world. In stark contrast, efficiency depends on Hawk-Eye ideas.
The analogy pertains to much more than a tool in pro tennis. It describes two worlds apart – the old ways and the way ahead.
Daily news is the report card on the old ways. How is regulation faring in the world?
Economic losses from regulatory failures grow larger, more frequent and glaring. Review the news: losses from the BP oil spill, from cave-ins of mines and mine wastes, from nature’s risks to Japanese nuclear plants, from polluted water sources, from recalls of unsafe food and from overgrown gambles on Wall Street.
The investigation of the fatal blunders made in drilling far below the Gulf waters was widely praised inside and outside the oil industry. The report said the widespread losses began with lagging regulations.
Lagging regulations result in losses so large they end careers of business leaders and end old-time companies as well. We see both.
Why does regulation fail to keep up with the pitfalls? Three reasons:
•The regulated bodies devote funds and manpower to innovating ways of doing business, whether it is called research and development in engineering or credit risk analysis in banking.
•No one devotes resources to finding new ways to regulate. Companies invent better ways to cut emissions, but no one is hired to do R&D in regulating.
•Regulation has no license to act until the visible losses are overlarge. The axiom said of armies applies to regulations: they are designed to fight the last war not the next war.
The consequence of these factors is where we are. The finger-pointing at who caused the economic losses promotes the theme that regulation does not work.
So voices call for halts to drilling, mining, nuclear power, Wall Street and regulating.
Very few work to engineer more efficient regulating processes, which is the normal approach to business systems.
Indeed the dictionary says “businesslike” is to be “efficient, practical, systematic.” Regulation grapples with total risk. Business leaders strive to gauge risks for the success of their companies. Risk coexists with innovation that adds real value for society and the nation.
Yet the losses that accrue from bad gauging are also real. “Efficient” is the watchword and expanding losses are not efficient.
The nation’s economy would profit by a shift from the shopworn McEnroe model to more efficient regulatory tools.
To coin a term, we need Regulatory Arts and Sciences. The first step is gathering ideas for the new field of focus.
Regulatory Arts and Sciences have roots in traditional fields.
These range from engineering and applied science, law and business administration to communication and journalism.
The list of potential course titles delivered to the curriculum committee begins with:
•History of regulation
•Regulatory processes: rule-making, permitting, surveillance, enforcement
•Elements of statistics
• Risk assessment
• Risk communication
• Economic stability
•Integrated cost factors
•Efficient work systems
•Advanced surveillance techniques
•Automated data and the public forum
•Case Studies in federal and state regulation
Regulatory efficiency equates neither with stricter rules nor less-strict rules. Efficient rules are rules that produce better results in less time at less cost.
The purpose of the new science is not to win today’s tribal wars of regulation. To think so is to fail.
The purpose of change is to pilot the discipline of regulation to a higher plane of regard.
This is the breakthrough that opens the way to economic well-being.
New Mexico Citizens
for Clean Air & Water