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Professor of the Practice of Public Management John F. Kennedy School of Government Harvard University October 21 st 20

Mapping the Regulatory Landscape. Professor of the Practice of Public Management John F. Kennedy School of Government Harvard University October 21 st 2009. Setting the Mission. Illegal. Harmful. “Obsolete” “Unreasonable” “Nit-picky”. “Not authorized” “Mission-creep”

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Professor of the Practice of Public Management John F. Kennedy School of Government Harvard University October 21 st 20

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  1. Mapping the Regulatory Landscape Professor of the Practice of Public Management John F. Kennedy School of Government Harvard University October 21st 2009

  2. Setting the Mission Illegal Harmful “Obsolete” “Unreasonable” “Nit-picky” “Not authorized” “Mission-creep” Entrepreneurship? (Easy) John F. Kennedy School of Government, Harvard University

  3. The “Expert” Model “Acknowledge the constant need to make choices. Make them rationally, analytically, democratically. Take responsibility for the choices you make. Correct, by using your judgment, deficiencies of law. Organize yourselves to deliver important results. Choose specific goals of public value, and focus on them. Devise methods which are economical with respect to the use of state authority, the resources of the regulated community, and agency resources. And as you carefully pick and choose what to do and how to do it, reconcile your pursuit of effectiveness with the values of justice and equity.” The Regulatory Craft: Controlling Risks, Solving Problems, and Managing Compliance, Brookings Institution, Washington D.C., 2000. Ch. 1 John F. Kennedy School of Government, Harvard University

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  5. Theory of operations Detail/Micro-level Aggregate/Macro-level Production and Operations Mgmt Internal (Agency) Tailor-made interventions General Theory External (World) “Parse the Risk” John F. Kennedy School of Government, Harvard University

  6. Advice for Canada…. • By all means finish the important business of process improvement, and cutting unnecessary red tape • Don’t imagine that will get you where you want to be • Skip the swinging of the regulatory pendulum, and the associated 5-7 years of misery • Organize yourselves so you can systematically identify, assess and address important risks, harms, or problems • Use this task-oriented, risk-reduction focus to determine which tools to use, and when, and what kind of relationships to establish with the regulated community. • When you’ve designed and begun to operate a mature risk control operation, let me know! John F. Kennedy School of Government, Harvard University

  7. Outcome Quality v.Process Quality John F. Kennedy School of Government, Harvard University

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  10. Financial Crisis:General Lessons for Regulators • Catastrophic failures, in well regulated systems, are all novel. • The public are fickle, and the regulatory profession should work to make them less so! • Agglomeration and globalization takes out the flood compartments, and endangers the whole ship. Small (and specialized) is beautiful. • “Too big to fail?” (or “to control”, or “to take enforcement action against”). Consider earlier; not later. • Beware issues of “low salience.” • Adversaries hide under cloaks that engender sympathy, so their attacks are confused with more benign problems. Distinguish carefully, and don’t be fooled! • Beware the sequential relaxation of controls in the absence of a disaster (which is a natural human tendency). John F. Kennedy School of Government, Harvard University

  11. Special Categories of Harms John F. Kennedy School of Government, Harvard University

  12. Special categories that appear in particular contexts: • High-level harms: which transcends the scope of existing control system • Slow-acting harms: involving natural, biological or physiological systems; time intervals between causes, interventions, and outcomes may run to several decades. • Where the risk-control function finds itself in a hostile context: risk-control appears as peripheral task, conflicting to some degree with the core purposes or culture of an organization. John F. Kennedy School of Government, Harvard University

  13. Special categories that bother almost everyone, sometimes! • Invisible harms: low rates of reporting or detection; bulk of the problem invisible, & scope uncertain. • Harms involving conscious opponents:control task is a dynamic game played against adaptive opposition, each side seeking to outsmart the other. • Catastrophic harms: calamities, but of very low frequency or probability, which may never have occurred. • Harms in equilibrium: involves forces that work to preserve status quo, and counteract small perturbations; incremental strategies unlikely to succeed; progress requires initial ‘big shove’, followed by navigation towards new (preferred) equilibrium position. • Performance-enhancing risks: improper or unlawful risk-taking enhances core aspects of an organization’s performance. Performance imperatives overwhelm caution. John F. Kennedy School of Government, Harvard University

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