Where Things Happen: The Local Dimension in Regulation

Abstract

1 Regulation: a Multifaceted WoRd This book aims at proposing an approach to local regulation that goes beyond the traditional set of instruments of descriptive and prescriptive regulatory analysis. If the slogan 'All policies are local' seems intentionally exaggerated, considering the absence of a local dimension in monetary and foreign policy, the need for a closer look at the local dimension of pol-icies, and in particular of regulation, is the true reason for this handbook. The local dimension is where all things seem to end up: water and sewer-age services, everyday mobility, waste cycle, local energy networks, welfare aid, local water and energy infrastructures, pipelines, and green facilities. Yet before introducing the basic ideas of this book, it is appropriate to look at the semantics of the word 'regulation', which per se possibly carries too many meanings and underpins a variety of forms of intervention. We fre-quently refer to the complex system of law as 'regulation', with a broader meaning covering all the laws and rules issued and enforced by states, regions, counties and municipalities, but also regulatory agencies and entitled public bodies. In this context, the permission system, licensing, labeling, and safety and environmental rules and controls that businesses have to comply with in their activities, frequently called 'red tape', defines a particular area of policy interest; the core issues have been highlighted by the debate, at all latitudes, on regulatory reform and the controversial suggestion to cut off and simplify rules in order to boost investments 1 . More specifically, economic regulation refers to the whole system of state intervention, at macro and micro level, in market functioning and economic transactions, with a different degree of invasiveness varying from state-planned economies to soft intervention in free-market systems. And it is to the latter that we refer to in this handbook: the intervention to control and regulate monopolies and markets that do not work properly. The public interest should be the long-term goal to be pursued against rent seeking and consumer exploitation, but at the same time incentives to private investment should be maintained. Conventionally, we refer to this particular meaning as 'industrial regulation' (Loeb and Magat 1979; Sappington 1982; Baldwin et al. 1999; Laffont and Tirole 2003). Furthermore, a variety of informal regulatory frameworks, that is to say, regulation not issued and enforced by the public authority, play peculiar roles in many contexts. Take civil regulation, for example: it stems from solid social capital networks and settles in communities over centuries, enforced by a network of collective controls, rewards, and blames, ending up in positive social outcomes (Ellickson 1991). Commons and public goods management offer a rich set of examples and case studies, from forestry to green areas in urban centres (Ostrom 1990). Beside civil regulation lies the concept of self-regulation. It covers a variety of situations in which organisations and market actors spontane-ously and autonomously issue self-rules to provide signals of their expected behaviour in relation to third parties, social problems, the environment, and other public issues. Codes of conduct by multinational enterprises and protocols for client complaints in hospitals or utilities, when not mandated by state law, lie in this domain (Cohen 2004; Williams 2004). Nevertheless, we should be careful in dealing with the grey area between true self-regulation, aimed at improving transparency, openness, and fair-ness in market relationships, and cartels, in which competitors try to tune each other in relation to clients or public authorities, with only the ulti-mate goal of protecting/improving the advantage of the unfair market positions they enjoy. Reputation building in social network platforms pro-viding services (like Uber, Blablacar, and AirBnB) is also an example of self-regulation sometimes clashing with the formal rules. Returning to the concept of economic regulation, when enforced by policy instruments such as price/quality/quantity controls, merger 18 F. BECCHIS