Better regulation can be achieved without resorting to statutory state regulation, which tends to be ineffective, cumbersome and poor value for money, according to a new study published by the Institute of Economic Affairs.*
In the study, Keith Boyfield, chairman of the newly launched IEA Shadow Regulatory Policy Committee, says that regulation has become the boom industry of the twenty-first century and the cost of regulation to the UK economy has been estimated at over £100 billion a year, or between 10 to 12 per cent of GDP.
Rather than rely on unwieldy and ineffective statutory regulation, the study shows that market-based regulatory mechanisms can offer a more effective means of maintaining well-regulated markets. For example, Professor Philip Booth and Terry Arthur show how stock exchanges can offer more effective oversight of securities markets than government intervention.
Andrew Brown, the Chair of the Committee of Advertising Policy, describes a new co-regulatory system that has been established to maintain robust oversight of the broadcast advertising sector. This is a rare example of an industry that has moved away from a regulatory regime dominated by a government agency and embraced, in preference, an industry funded self-regulatory body to improve standards. The study shows that the Advertising Standards Authority has provided effective regulation of television and radio advertising for eighteen months, having won business support, Ofcom approval and consumer confidence. In contrast to these examples, David Blake, Debbie Harrison, Alistair Byrne and Bill Rhodes show how increased government regulation of final salary pension funds is likely to lead to the completely perverse result of less security for pension benefits as companies wind up those schemes that reduce risk the most for employees.