Economic Regulators Nicky Cusworth Chair Economic Regulation - PowerPoint PPT Presentation

Challenges for Economic Regulators Nicky Cusworth Chair Economic Regulation Authority To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 1 1

Presentation outline • Background – how and why we got here • Architecture – regulatory principles and processes • Challenges for regulators (and de-regulators!) • Conclusions To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 2 2

Economic regulation background • An ancient challenge • “Golden Age” • Stagflation • Micro-economic reform • Financial deregulation • Labour market deregulation • Import tariffs and quotas • Tax reform • Government trading enterprises • Competition policy To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 3 3

Elements of f National Competition Policy • Limiting anti-competitive conduct • Reforming regulation which unjustifiably restricts competition • Reforming the structure of public monopolies to facilitate competition • Providing third-party access to certain facilities that are essential for competition • Restraining monopoly pricing behaviour • Fostering "competitive neutrality" between government and private businesses when they compete • Source: National Competition Policy Review 1993 (“The Hilmer Report”) To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 4 4

Economic Regulation Today what and why? What Why • Rules, usually set in law, governing • Economic what businesses can and cannot • Market failure do in their dealings with • Economic policy customers, employees, suppliers • Social and government. • Consumer protection • Minimum standards • Environmental • Externalities (market failure) • Protected values To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 5 5

Economic Regulation how? Policy Makers Government Agencies Policy Advisors Implementation Political advisors Independent regulators Policy agencies Government departments Stakeholders Local government Think tanks/academics Professional associations Appeals and Enforcement Courts Tribunals Regulators To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 6 6

Economic Regulation Authority • Regulates access to monopoly infrastructure • licenses service providers • monitors and regulates markets • conducts inquiries (when referred by government) To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 7 7

Long-term interests of f consumers • “to benefit the WA community by promoting an efficient and customer- focused economy” • Efficiency challenges • Productive • Allocative • Dynamic • Social “Public” goods and services • Long-term viability of service providers To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 8 8

Market failure • Public goods • Externalities • Market power • Imperfect information To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 9 9

Challenges: policy “People Respond To Incentives” - N . Gregory Mankiw’s Fourth Principle of Economics • Why aren’t we there yet? • Goals – what should we be trying to do? • Process – how do we get there? To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 10 10

Challenges: consumers “People Respond To Incentives” - N. Gregory Mankiw’s Fourth Principle of Economics • What do consumers want? • How do consumers behave? • Behavioural economics To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 11 11

Challenges: producers “People Respond To Incentives” - N. Gregory Mankiw’s Fourth Principle of Economics • Which incentives? • Complexity • Litigiousness To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 12 12

Challenges: regulators “People Respond To Incentives” - N. Gregory Mankiw’s Fourth Principle of Economics • Perverse incentives • Technocracy • Information asymmetry • Stakeholder engagement • Independence • Financial • Policy role? To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 13 13

Challenges: markets “People Respond To Incentives” - N. Gregory Mankiw’s Fourth Principle of Economics • Regulatory models based on fairly static and predictable markets • Technology • New markets with new ways of creating value To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 14 14

Types of f goods and services Rivalrous Common Property Private Goods Fisheries, water resources Food, clothes Non-Excludable Excludable Mixed or “Club” Goods Public Goods Pipelines, cinemas, Free to air TV, street art, cable TV defence Non-Rival To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 15 15

Conclusions • Looking back • What worked • What didn’t • Looking forward To benefit the WA community by promoting an efficient and customer-focused economy To benefit the WA community by promoting an efficient and customer-focused economy 16 16