Regulation
Management of complex systems according to rules and trends.
Regulation refers to how complex systems are guided by a set of rules and patterns. In systems theory, such rules appear across biology and society, though the term shifts meaning depending on the field. In government, regulation (often in plural form) means delegated legislation used to enforce primary laws, including land-use rules. In economics, it is regulatory economics; in finance, financial regulation. In business, industries sometimes self-regulate through trade associations or self-regulatory organizations, setting and enforcing rules with less government oversight. In biology, gene and metabolic regulation help organisms adapt and maintain homeostasis. In psychology, self-regulation theory examines how people control thoughts and behaviors to achieve goals.
Regulation in social, political, psychological, and economic contexts can appear as legal restrictions from government, contractual obligations (such as insurance contracts), self-regulation in psychology, social norms, co-regulation, third-party regulation, certification, accreditation, or market regulation. State-mandated regulation involves government stepping into private markets to pursue policy goals or produce outcomes that might not otherwise occur, from consumer protection to faster growth or technological progress. These regulations can prescribe or prohibit conduct (command-and-control), adjust incentives (incentive regulation), or reshape preferences (preferences shaping). Common examples include limits on environmental pollution, child labor bans, minimum wage laws, truthful food and drug labeling requirements, safety standards for testing and quality, and zoning or development approvals. Controls on market entry or price regulation are far less frequent.
A key question in regulation is whether a regulator or government has enough information to make advance rules more efficient than holding parties liable after harm occurs, and whether industry self-regulation might be better. The economics of adding or removing market regulations is studied in empirical legal studies, law and economics, political science, environmental science, health economics, and regulatory economics. The power to regulate must include the power to enforce decisions, and monitoring is a key tool for national regulatory authorities.
- Field
- Systems theory, government, economics, finance, business, biology, psychology
- Forms
- Legal restrictions, contractual obligations, self-regulation, social regulation, co-regulation, third-party regulation, certification, accreditation, market regulation
- Key question
- Whether regulator or government has sufficient information to make ex-ante regulation more efficient than ex-post liability for harm, and whether industry self-regulation might be preferable
- Measurement tools
- Global Indicators of Regulatory Governance, V-Dem Democracy indices, QuantGov project
- Early examples
- Ancient Egyptian, Indian, Greek, Roman civilizations; standardized weights and measures; Chinese national currency system and paper currency
Lore & Background
Regulation of businesses existed in ancient early Egyptian, Indian, Greek, and Roman civilizations. Standardized weights and measures existed to an extent in the ancient world, and gold may have operated to some degree as an international currency. In China, a national currency system existed and paper currency was invented. Sophisticated law existed in Ancient Rome. In the European Early Middle Ages, law and standardization declined with the Roman Empire, but regulation existed in the form of norms, customs, and privileges; this regulation was aided by the unified Christian identity and a sense of honor regarding contracts.
Reader's Guide
Modern industrial regulation can be traced to the Railway Regulation Act 1844 in the United Kingdom, and succeeding Acts. Beginning in the late 19th and 20th centuries, much of regulation in the United States was administered and enforced by regulatory agencies which produced their own administrative law and procedures under the authority of statutes. Legislators created these agencies to require experts in the industry to focus their attention on the issue. At the federal level, one of the earliest institutions was the Interstate Commerce Commission which had its roots in earlier state-based regulatory commissions and agencies. Later agencies include the Federal Trade Commission, Securities and Exchange Commission, Civil Aeronautics Board, and various other institutions. These institutions vary from industry to industry and at the federal and state level. Individual agencies do not necessarily have clear life-cycles or patterns of behavior, and they are influenced heavily by their leadership and staff as well as the organic law creating the agency. In the 1930s, lawmakers believed that unregulated business often led to injustice and inefficiency; in the 1960s and 1970s, concern shifted to regulatory capture, which led to extremely detailed laws creating the United States Environmental Protection Agency and Occupational Safety and Health Administration.
Did You Know?
- Regulation can prescribe or proscribe conduct, calibrate incentives, or change preferences.
- Common examples include limits on environmental pollution, laws against child labor, minimum wages laws, and food and drug safety regulations.
- In some Scandinavian countries, industrial relations are to a very high degree regulated by the labour market parties themselves in contrast to state regulation of minimum wages.
- The length of the Code of Federal Regulations of the United States increased over time.
More in Government & Public Administration 1-24
Spotted an error? Know more?
Reader corrections go straight into our review queue. Suggest an edit · How this site is sourced