Regulators,policy-makers,and the making of policy: Who does what and when do they do it?

Abstract

The formation of independent regulatory agencies for infrastructure has led to considerable controversy in many countries over the respective roles of government policy-makers and of ‘independent’ regulators. The fact that independent regulatory agencies are not only new entities, but also new concepts, has contributed to a lack of clarity on their role in policy formulation. The issue is often characterized as distinguishing between the setting and implementation of policy. That characterization, however, is not very useful. For a variety of reasons relating to politics, expertise, inability to be prescient, transparency, jurisprudence, imprecision in wordsmithing, and finance, the issue is perhaps better defined in terms of two levels of policy-making, macro and micro. The former is the domain of government policy-makers, while the latter seems best suited for regulators. While government always retains the ultimate responsibility for the formulation of policy, it is best to delegate nuanced policy decisions, micro policy, to regulators. Doing so makes for less politicization, more predictability, more transparency, and more informed decision-making.