Designing Effective Regulation: A Positive Theory

The design of regulation has undergone much change with the rise of the regulatory state.1 The use of the rigid and punitive command-and-control approach has been superseded by new and more flexible ways of addressing social problems. However, the new approaches are not a panacea.2 For example, it is widely accepted that newer approaches used to regulate banks in the United States and some European countries contributed to the Global Financial Crisis – a failure having prolonged and catastrophic effects.3 A more modest example is the near total collapse of the Australian childcare sector in 2008 following the ‘deregulation’ of the industry without adequate public oversight mechanisms.