EXTENDING EVALUATION TOWARDS REGULATORY IMPACT - PowerPoint Presentation

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EXTENDING EVALUATION TOWARDS REGULATORY IMPACT

ASSESSMENT TO REDUCE REGULATORY BURDENS

A NEO-INSTITUTIONAL STUDY OF CONTEXT, INTERNATIONAL 

IMPULSES, AND FINNISH EXPERIENCES

Pertti Ahonen, Petri Uusikylä & Riikka Sievänen

EES

Biannual

Conference, 2018, Thessaloniki

Contact

data of

the

1st

author

and

the

1st

presenter

:

pertti.ahonen@helsinki.fiSlide2

Introduction

 PurposeTo fill a research gap on the institutionalization of the accounting and evaluation of costs of regulation to its objects in societal and political contexts of the real world as opposed to the abstract decontextual world of principles and formal methods.RQsWhat kind of context does the general regulatory impact assessment provide for the accounting and evaluation of costs of regulation to its objects in Finland? Which international influences have diffused to Finland in the accounting and evaluation of costs of regulation to its objects?

With which intentions, motivations and experiences have steps been taken in Finland in the accounting and evaluation of costs of regulation to its objects?

18.9.2018

(c) Pertti Ahonen 2018-2019

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Theory and hypotheses

TheorySociological neo-institutional theory of John W. Meyer of Stanford and his colleagues, and normative neo-institutional theory of James G. March and Johan P. Olsen.HypothesesHypothesis 1: Regulatory impact assessment (RIA) characterized in Finnish official guidelines represents the rationalistic logic of consequences, whereas in actual practice RIA rather represents the conventional logic of appropriateness (March n& Olsen).Hypothesis 2: Besides in a formally rational way, the accounting and evaluation of costs of regulation to its objects may comprise (a) seeking legitimation by means of emulating institutional models brought from elsewhere and represented as exemplary, (b) representing conditional impulses to adopt solutions as unconditional, or (c) promoting solutions that aberrate from their predecessors only in limited ways (Meyer & al., March & Olsen). Hypothesis 3: Besides or instead of being formally rational, the accounting and evaluation of regulatory costs to its objects may be comprised of rationalized myths emphasizing the achievement of improvements even where these are hardly achievable for specific reasons (Meyer et al.).18.9.2018(c) Pertti Ahonen 2018-2019

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METHODS AND DATA

Method:Newer methodologies of case study researchSource criticism in the lines of historical and other human science researchExamining qualitative research material until saturation is reached, meaning that the same results started reappearingResearch material:Except for acquiring selected

to documents to examine…the recent

participation

of

two of the authors in

three and one of the authors in

one

joint

project

enables

re-examination of an ample material that these authors knew as insiders

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classification of regulatory costs

 Direct costsEnforcement costsIndirect costs

Direct compliance costs

Hassle costs

Incidence of the costs

The objects of regulation, such as businesses, citizens, and lower levels of public administration

Regulatory authorities

The economy in general

Types

Regulatory fees, administrative burdens, one-time and running investment and operational costs to objects of regulation

From corruption, the irritation of objects of regulation, uncertainty, waiting times, and regulatory changes

Costs of monitoring, control, auditing, adjudication, and implementation

Substitution costs, transaction costs, inefficiency, obstacles to innovation and competition

Difficulty of calculation

Low (e.g., regulatory fees) to moderate (e.g., administrative burdens)

High (e.g., irritation

toobjects

of regulation) to moderate (e.g., costs of waiting times)

Low (e.g., direct costs to regulatory authorities) to moderate (e.g., monitoring costs)

High; the calculation generally requires intricate economic analysis

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RESULTS: Regulatory impact assessment as the context of the accounting and evaluation of the costs of regulation to its objects

The Finnish guidelines on regulatory impact assessment (RIA):“Impact assessment deals both with the intended effects and benefits of the project and with its costs and possible negative effects. Risks and unforeseen effects should also be charted during the assessment.”The wording leaves no doubt of the rationalistic logic of consequences extending to social cost-benefit analysis and even beyond. However, research evidence has accumulated that the implementation of these guidelines is lax and general.In actual practice the RIA examined represents the institutional logic of appropriateness rather than the institutional logic of consequences. Hypothesis 1 can be sustained. 18.9.2018(c) Pertti Ahonen 2018-20196Slide7

Results: International influences upon the accounting and evaluation of costs of regulation to its objects in Finland

In the accounting and evaluation of the costs of regulation to its objects Finland has emulating Germany, Britain, and Canada In certain respects the accounting and evaluation in the countries indicated satisfies the requirements of formal rationality. However, reference to the standard cost method (SCM) of regulatory impact assessment (RIA) in each of the countries is not rarely used to legitimate RIA more widely than the proper scope of SCM allows. Rhetorical persuasion has not been missing, either, while value-laden notions such as “regulatory burden” and “administrative burden” allege that regulation is perverse and futile and jeopardizes core values of the market economy. We can observe characteristics of a cognitive lock-in in the widespread utilization of SCM in RIA, suggesting a conventional “logic of appropriateness” despite the SCM origins in a “logic of consequences”. In conclusion, the second research hypothesis can be sustained. 18.9.2018(c) Pertti Ahonen 2018-20197Slide8

The scope of the Finnish model of accounting and evaluation of cost of regulation to business companies

Cost itemsThe Finnish model (TEM 2017)International comparisons (see Table 2)1. Enforcement costs to regulatory authorities

Excluded

In Finland as in Germany, Britain and Canada, but unlike France

2. Direct costs of regulation to its objects

2.1. Hassle costs

In principle not excluded, but accounting and evaluation procedures undefined thus far

Included in Finland at least in principle unlike the other countries

2.2. Direct

compliance

costs

2.2.1. Regulatory fees on objects of regulation

Included

Included in Finland at least in principle unlike the other countries

2.2.2. Administrative burdens

Included; in addition fringe benefits and overheads taken into account by means of multipliers

Does not differ from the comparison countries

2.2.2.1. One-time administrative burdens

Included

As in the comparison countries

2.2.2.2. Running administrative burdens

Included

As in the comparison countries

2.3. Substantive compliance costs

In principle not excluded, but accounting and evaluation procedures undefined thus far

Differently from Canada, more extensively than Germany, resembling Britain and France

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RESULTS: The accounting and evaluation of the costs of regulation to its objects in Finland

The Finnish model of accounting and evaluation of the costs of regulation to business companies threatens to reduce to a rationalized myth, should its implementation not receive the support of a more assertive implementation of the existing official guidelines of regulatory impact assessment. It is reasonable to consider supplementing the present Finnish RIA and the proposed new model of accounting and evaluation of the costs of regulation to business companies with ex post assessment. The evolving Finnish accounting and evaluation of regulatory costs to business companies poses also technical challenges. Previous research offers ample evidence of technical problems of RIA, including difficulties to assure the quality of input data. Where quality assurance fails, RIA remains nothing but a rationalized myth.The third hypothesis can be sustained. 18.9.2018(c) Pertti Ahonen 2018-20199Slide10

DISCUSSION

Guided by neo-institutional theoretical ideas this paper has examined regulatory impact assessment (RIA) that deviates from what the formal rationality of ends, means and side effect indicates. The paper has examined how RIA follows the conventional institutional logic of appropriateness, emulates institutional solutions taken elsewhere to legitimate preferred solutions, represents conditional situations as unconditional, adopts solutions that only slightly aberrate from the prevailing state of affairs, and comprises institutional rationalized myths. This paper has substituted newer case study methodologies for misplaced statistical generalization in one- or few-case studies. In seeking answers to the first research question and trying the first research hypothesis, the accounting and evaluation of costs of regulation to its objects was inserted in its wider context of the overall RIA in Finland. Seeking to answer the second research question and trying out the second hypothesis neo-institutional ideas were used to open the research perspective wider than assumptions of formal rationality allow and consider important aberrations from this rationality. Third, answering the third research question and trying the third hypothesis institutional rationalized myths were examined as qualifications to formal rationality.18.9.2018(c) Pertti Ahonen 2018-201910