Do Private Interest Theories Provide a Better Explanation of Regulatory Outcomes - Coursework Example

Regulators claim they act ‘in the public interest’. Why is it often difficult to identify what is in the public interest, and do private interest theories provide a better explanation of regulatory outcomes? 1. Introduction The success of governments worldwide is usually judged in accordance with their ability to protect the public interest. The term public interest is commonly used for reflecting the interests of the most important part of the society, i.e. the citizens. However, the specific term can also be used for reflecting the interests of the public in general, no matter their citizenship status. In this context, the criteria for evaluating the effectiveness of regulators are not standardized. Current paper focuses on two critical issues: why the identification of public interest can be difficult and whether the private interest theories can provide a better explanation of regulatory outcomes. The review of the literature published in regard to this issue led to the following assumptions: the priorities of regulators worldwide can be different; also, the local legal systems may allow different criteria for judging the existence or not of public interest. These facts, as indicative examples, lead to the assumption that public interest is often difficult to be identified. Furthermore, it has been proved that private interest theories are more effective in explaining the regulatory outcomes. In any case, the mode of regulation used in each country, as aligned with the local legal system, defines the level at which the public interest is actually served or not within the particular country. 2. Public interest - Why is it often difficult to identify what is in the public interest? Public interest is usually set as the basis of regulatory processes worldwide. Regulation, as a set of processes, can be described as ‘a sustained and focused control exercised by a public agency over activities that are valued by a community’ (Selznick 1985, 1, in Baldwin, Cave and Lodge 2012, p.3). The promotion of public interest is usually developed using different criteria. A series of public interest theories have been introduced aiming to explain the terms under which regulatory measures would be justified. In accordance with Meins (2003) all these theories are based on the principle of efficiency, meaning that they consider regulatory measures as necessary only ‘in the case of market failure’ (Meins 2003, p.14). If there is no such case, then no regulatory measures can be promoted since the market itself would be able ‘to allocate goods and services in an efficient manner’ (Meins 2003, p.14). Moreover, it is explained that regulatory measures would be developed only if the public interest is threatened, as for example in the case of ‘externalities or monopolies’ (Meins 2003, p.14). In other words, the public interest is closely related to competition; when the competition is limited, the interests of people are threatened, more or less, and the development of regulatory measures is unavoidable. A similar approach is used in the study of Yeung (2004). The above researcher notes that the public interest theories are ‘usually normative’ (Yeung 2004, p.7), meaning that these theories focus on the evaluation of whether the regulatory measures introduced in a particular society have achieved their goals, which are collective (Yeung 2004, p.7). At the next level, public interest theories give to the regulators the right to take appropriate measures in case that the ‘welfare of the community’ (Yeung 2004, p.7) is threatened. The term welfare of the community is quite broad, not limited to market competition, but incorporating a series of elements, such as health and safety, the job market, the terms of education and so on (Baldwin, Cave and Lodge 2010). In any case, regulatory measures can be considered as serving the public interest when they refer to the achievement of ‘collective goals’ (Yeung 2004, p.7). It is implied that regulatory measures cannot be justified if they aim to promote the interests of individuals. At this point, the following problem appears: when the interests of a group of individuals are threatened, how the existence of public interest can be verified? In other words, which are the terms for deciding that the term of collectiveness exists, so that regulatory measures can be developed? The use of private interest theories would be possibly used for justifying the introduction of regulatory measures, as analysed in the section 3 below. As noted above, the public interest theories are based on the view that the promotion of public interest is set as the priority of legislators. In practice, the above requirement is not met, at least not fully. This problem is highlighted in the study of Croley (2008). In accordance with the above researcher, one of the key problems of regulatory processes is that they are not aligned with the needs of all interested parties; in fact, it seems that the interests of parties with ‘less concentrated power’ (Croley 2008, p.64) are often ignored. In other words, the use of ‘public interest’ as a justification for the regulatory measures introduced in a particular society is often inaccurate, leading to false impressions as of the actual goals of the particular measures. At this point, it would be critical to locate the elements of public interest. Then, it would be easier to understand why the public interest is often difficult to be identified. The term public interest is likely to be used in order to describe the interests of the population in general; the term interest in the above case refers to the health, social and economic status of people living in a particular state (Baldwin, Cave and Lodge 2012). Under certain conditions, the term public interest is used for reflecting the interests of citizens, i.e. of that part of the population that is closely connected to the state (Baldwin, Cave and Lodge 2012). In accordance with the issues discussed above, the public interest represents the interests of the citizens, viewed as an entity, i.e. a unit. However, the status of citizenship has been highly changed the last years, in most countries worldwide, due to the increase of immigration and the change in the terms of trade and commerce internationally (Oliver, Prosser and Rawlings 2010). This means that societies around the world have been changed, being constituted from people with different ethnicity. The identification of public interest in such societies can be quite difficult, due to the following reason: the interests of each group of people, representing a particular ethnicity, are likely to be opposed with the interests of other groups; moreover, the interests of the foreigners, immigrants, are expected to be different from the interests of natives (Oliver, Prosser and Rawlings 2010). The identification of public interest within a particular country may be also difficult for the following reason: the level of deregulation in countries worldwide seems to be high, mostly under the influence of strong financial pressures in all markets (Rossi 2005). In such environment, the identification of public interest is quite difficult since these conditions usually lead to ‘the convergence of private and public interests’ (Rossi 2005, p.8). At the next level, under certain terms, it would be difficult to identify the public interest when the views of people, as reflected through the social media and the Internet are not aligned with the views of the large part of the population, as for example in countries where the access to Internet and social media is limited, due to technical, financial or regulatory constraints (Mansell 2007). In this context, it would be quite difficult for third parties to check whether people in the particular country are satisfied with the regulatory measures promoted locally. 3. Do private interest theories provide a better explanation of regulatory outcomes? In the context of the private interest theories, the efforts of legislators to promote regulatory measures are faced with scepticism, on the basis that regulatory interventions do not usually promote the public interest, as they claim, but rather the interests of specific groups of people (Yeung 2004, p.7). Moreover, in opposition with the public interest theories, which are normative by their nature, the private interest theories are positive, focusing on the reasons for which regulatory measures are introduced (Yeung 2004, p.7). The ways in which regulatory measures are developed are also examined by the private interest theories (Yeung 2004, p.7). It is made clear that private interest theories can explain more effectively the regulatory outcomes, than the public interest theories that focus only on the issue whether the regulatory measures taken achieve their collective goals (Yeung 2004, p.7), without examining how and why the specific regulatory measures have been introduced. Towards the same direction, Morgan and Yeung (2007) noted that private interest theories promote the idea that the political arena in countries worldwide is shaped in such way that the interests of specific groups of people are promoted; these interests, in accordance with the private interest theories, are secured through regulatory measures which are justified by referring to the public interest, while no such case exists (Morgan and Yeung 2007). At the next level, private interest theories do not refer to the potential defects of regulatory measures (Morgan and Yeung 2007). Thus, private interest theories cannot be used for retrieving solutions in order for the processes of regulatory measures to be amended. At this point, the effectiveness of private interest theories would be negatively criticized, not being able to control the appropriateness of regulatory measures’ processes. However, the above weakness of private interest theories does not affect their value in explaining regulatory outcomes, as they offer a detailed description of the progress and the final form of regulatory measures (Baldwin, Cave and Lodge 2010). More specifically, as noted in the study of Abraham and Lewis (2000), the private interest theories suggest that regulatory measures favour the interests of specific groups, which, in accordance with the private interest theories, are ‘the producer groups, i.e. the private industry’ (Abraham and Lewis 2000, p.9). These groups, as the private interest theories suggest, are usually ‘well-organized in promoting their interests’ (Abraham and Lewis 2000, p.9), compared to consumers, who are usually not appropriate organized and informed in regard to their interests. Moreover, the producer groups are able to provide to regulators, i.e. the political parties, significant support, not so much in terms of votes, but rather in terms of funds (Abraham and Lewis 2000, p.9). As a result, the regulatory measures introduced in a particular society, are expected to promote the interests of producer groups, i.e. of the private industry (Abraham and Lewis 2000, p.9). In a more detailed description of the potential role of private interest theories in explaining regulatory outcomes, Abraham and Lewis (2000) note that through the private interest theories, three different explanations can be given in regard to the role of regulators, as their role influences the regulatory outcomes: a) in the context of the first explanation, the benefits of regulatory measures are shared by all parties, meaning the private industry and the public, but the costs are covered solely by the private industry; in this case, the regulatory processes cannot proceed, b) it is also possible, that the costs are covered by all parties but benefits result only for the private industry; in this case, regulators promote, exclusively, the interests of the private industry, c) there is also the case that both benefits and costs are shared between the private industry and the public; in such case, regulators are considered as having ‘the role of arbitrators’ (Abraham and Lewis 2000, p.9). The form of the regulatory outcomes is differentiated, in accordance with the balance of costs and benefits among the parties, i.e. the public and the private industry. 4. Conclusion The development of effective regulatory measures can be a challenging task, since the identification of public interest is often quite difficult. As proved through the literature presented above, the identification of public interest can be prevented either deliberately or not. The conflicts between the private and the public interests, as developed locally, usually set constraints to the willingness of regulators to act as arbitrators between the private industry and the public. The use of private interest theories for explaining regulatory outcomes can offer a more precise view of the level at which public interest is actually pursued or not through specific regulatory practices. In any case, the responsibility of regulators in regard to the protection of public interest cannot be denied but the intervention of various factors in the regulatory processes cannot be ignored. This means that when judging the level of promotion of public interest within a particular society one should take into consideration not just the balance of benefits/ costs between the private industries and the public but also the potentials of each of these parties to support the regulatory processes and the actual effects of the regulatory processes on the country’s social and economic framework. References Abraham, J., and Lewis, G. 2000. Regulating medicines in Europe: competition, expertise and public health. London: Routledge. Baldwin, R., Cave, M., and Lodge, M. 2012. Understanding Regulation: Theory, Strategy, and Practice, 2nd edition. Oxford: Oxford University Press. Baldwin, R., Cave, M., and Lodge, M. 2010. The Oxford handbook of regulation. Oxford: Oxford University Press. Croley, S. 2008. Regulation and public interests: the possibility of good regulatory government. New Jersey: Princeton University Press. Endorf, C., Schultz, E., and Mellander, J. 2004. Intrusion detection & prevention. California: McGraw-Hill Professional. Mansell, R. 2007. The Oxford handbook of information and communication technologies. Oxford: Oxford University Press. Meins, E. 2003. Politics and public outrage: explaining transatlantic and intra-European diversity of regulations on food irradiation and genetically modified food. Munster: LIT Verlag. Morgan, B., and Yeung, K. 2007. An introduction to law and regulation: text and materials. Cambridge: Cambridge University Press. Oliver, D., Prosser, T., and Rawlings, R. 2010. The regulatory state: constitutional implications. Oxford: Oxford University Press. Rossi, J. 2005. Regulatory bargaining and public law. Cambridge: Cambridge University Press. Yeung, K. 2004. Securing compliance: a principled approach. 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