What is Regulatory Reform?

Regulatory reform is a concept that entails revamping the governmental structure of rules, either through creating new laws, changing existing ones, or repealing those in existence. The motivation for such regulatory reform may be economic or to mitigate some sort of harm that stems from the activity to be regulated. Depending on how the particular government is structured, regulatory reform may be effected through an administrative agency that has been created by that government to deal with that specific issue or through the repeal or passage of laws. There are proponents on the side of advocating for more regulation or less regulation in just about every industry.

Regulation by a government may be effected in any area that may be governed within a nation. Though it depends on the structure of the government as to the actual method of regulation, a government’s reach generally extends into any economic activity conducted within that country. For example, a country’s government that authorizes the creation of administrative agencies to oversee a particular industry or group of industries may simply issue an order — often called a ruling — to affect the way that any private party under its oversight may act. In a country whose government does not employ the use of administrative agencies, its lawmaking body may pass laws to effect such regulatory reform.

Regulatory reform can go both ways — either through the enactment of more rules or the repealing of existing rules. People most often advocate for more regulation in situations where there is a small group of people in which economic power is concentrated or there are harmful effects to the public. For instance, anti-trust laws that outlaw monopolistic businesses and ensure competition in the marketplace are a form of free market regulation. By limiting how much of a particular market a company can hold, the regulation seeks to prevent such a company from exploiting consumers.

Proponents of deregulation — regulatory reform that entails the repeal of governing rules — argue that if businesses are allowed to operate unfettered by rules that do nothing but hamper the way they conduct their business, more money can be made. Furthermore, if businesses make more money, it will have a positive effect on the economy as a whole. For example, regulations that require businesses to limit their carbon emissions for the sake of the environment impose mandatory measures that can be costly, which cuts into the profit of those businesses.