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Business - Written by on Thursday, February 12, 2009 22:14 - 4 Comments

Time for participatory regulation?

Recent events have got me thinking about regulation and just how strained and ineffectual our current systems have become. It’s not just the global financial crisis, although this alone illustrates what can happen when both markets and regulators fail. Issues as diverse as climate change, emerging technologies, international trade, food safety, infectious disease, and human rights demand novel approaches and I think wikinomics could be part of the solution.

Some of the issues that challenge today’s regulators include the sclerotic pace of rulemaking, increasing international interdependency, the lack of transparency in industry and government, the corrosive influence of “junk science” and money and an insufficient capacity for oversight.

After dismantling or circumscribing centralized regulatory agencies in the 1980s and 1990s, I think many governments will find they are ill equipped to deal with these challenges. In most sectors, deregulation was a cue for regulated industries to start designing and enforcing their own regulations. Decentralized rulemaking was intended to help make regulation more responsive to the needs of industries that were evolving quickly and becoming increasingly global in scope. Governments were to be the “regulators of last resort”—stepping in only after self-regulation was deemed to have failed. But in practice most instances of pure self-regulation have deficiencies and governments (for the most part) have proven unable or unwilling to take swift action when market failures became evident.

The upshot: without transparency, oversight and accountability, self-regulation is clearly inadequate. At the same time, the speed, interdependency and complexity of today’s world makes a return to centralized rulemaking and enforcement increasingly implausible. All this makes me think that the kinds of organizational innovations that make the Linux community, twitter and wikipedia remarkable could help regulators address some their challenges.

The big opportunity initially may be to foster greater citizen or stakeholder participation in monitoring and enforcing regulations that already exist. Naturalists and recreational users could be enlisted to help document abuses on public lands, just as individuals and organizations around the world are able to bring human rights abuses to global attention using new channels like YouTube or Winess’s Hub.

But citizens and other stakeholders could also help design and promulgate new rules, particularly where there are gaps in existing legislation. The consumer advocacy movements that currently police the social and environmental performance of industry are a good example. More governments could eventually sanction initiatives like these, while insisting on mandatory corporate sustainability reporting and other forms of transparency would bolster the efforts of citizen monitors.

The technological foundation – including RFID, satellite imagery, cheap personal video recorders and other Internet-connected devices – already exists to distribute the power and authority for designing and enforcing regulations to a broader network of participants. And I think that in the right niches and within certain communities of interest there is ample desire on the part of citizens to play a role in enforcing the rules they care about. I’m not sure that same enthusiasm exists within government and industry, which is why my preliminary research suggests that most new forms of participatory regulation are emerging completely outside traditional regulatory bodies.

I’ll be following up this post with a series of nascent examples. If participatory regulation is of interest to you or if you know of other examples, I would love to hear about it.


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KerrieAnne Christian
Feb 13, 2009 5:28

Anthony – you raise some good points. In the vacuum of good governance then an opportunity exists for community members to raise concerns. It is interesting to note that governments may regard such community members as “cranks” or “kooks” and try to eliminate opportunities for them to express their concerns. In fact there were some who pointed out concerns as to how Madoff could generate the financial returns claimed – sadly those views ignored. On the other side of the world in Wollongong Australia – locals repeatedly raised concerns about inappropriate town planning development decisions. The local council authority then eliminated the regular community forums that had been in place for the previous 15 years. Subsequently an inquiry was held and the town councillors all sacked – just as they had with the community forums.

There is a tendency to discount the views of whistleblowers and those who rock the boat. We need to have an appropriate place for them

Chet Geschickter
Feb 25, 2009 17:53

Anthony, I especially like the point you make about the necessity for transparency, oversight and accountability in order to have effective self-regulation. External regulation is expensive, cumbersome and inefficient; however, it becomes necessary when companies – and markets – fail. There is a repetitive cycle of capitalist crashes, each of which leads to new regulation in order to restart confidence: 1929 Stock Market Crash leading to the SEC, Enron leading to Sarbanes-Oxley, and the Sub-Prime Meltdown which will assuredly lead to some form of intense regulatory oversight and scrutiny which is first manifested in the “stress testing” of financial institutions currently underway. Thank you for making the invisible hand of capitalist motivations for transparency visible to me. Following your logic, transparency is in the best interests of those seeking profits. It enables them to continue to pursue their profit motives, avoid government interference, and differentiate from those who have something to hide. It appears that perhaps, transparency can indeed confer strategic advantage.

Anthony D. Williams
Feb 26, 2009 16:26

Indeed, and you’re quite right about the fact that smart companies are slowly waking up to the fact that transparency is in their best interest, in part because it can help forestall more onerous and expensive government regulations and also because transparency allows good firms to distinguish themselves from bad firms. I think that line of reasoning could be hugely transformative in the financial industry in the same way that it has already begun to transform the way companies think about their social and environmental performance.

Wikinomics» Blog Archive » Civic robots help assess water quality in real time
Mar 7, 2009 21:50

[...] love this example of participatory regulation. Marc Bohlen, an “artist-engineer” at the University of Zurich, has designed a floating [...]

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