Classifications of Regulations and Regulators

The regulators in the market can broadly be classified into those governed by legislative bodies and those produced by the market voluntarily. Let’s look at the types of regulators and their corresponding regulations.

Types of Regulators and Regulations

1. Government Agencies

Government-based regulators can be established departments and agencies or sets of independent regulators controlled by the government. Government regulators have the legal authority to approve and implement the regulations within their jurisdiction.

Courts always back government agencies. Courts help them interpret regulations and rules. Besides, courts expound on the allowed regulatory practice aside from administering punishment in case of any violations.

Classification of Government Regulations

The regulations supported by the government can be categorized into:

• Statutes: Laws that such legislative institutions as parliament approve.
• Administrative regulations or laws: These are the rules government agencies or other regulators pass.
• Judicial law: Exposition of the courts on the existing regulations.

2. Independent Regulators

Independent regulators make rules based on their authority and goals (objectives). The authority of the independent regulators often comes from their recognition and the power that a legislative statute or a government department or agency gives them. However, they remain non-governmental institutions.

The contrast between the independent regulators and the government regulators is that the latter does not receive any funding from the government, and their decision-making autonomy is limited. The advantage of autonomous regulation is that they are resistant to political control and pressure, and therefore, they can achieve their aims with little hindrance.

3. Self-regulatory Bodies

Self-regulatory institutions are private organizations that represent and control their members. Just like independent regulators, they are insulated from political influence and pressures. However, they face pressure from their members.

Self-regulatory bodies obtain their power from constituent members who agree to operate within an organization’s rules and standards. However, the authority of these organizations is not attached to the rule of law. Instead, they have the power to expel the members who breach their regulations. Moreover, self-regulatory organizations set the required minimum standards by stipulating conditions for membership.

Question

Which one of the following is least likely to be a feature of self-regulatory organizations?

1. They are independent regulators.
2. They are mandated to carry out government policies.
3. They represent and regulate their members.

Solution

The correct answer is B.

Self-regulating bodies do not carry out government policies but are somewhat independent of the government and resistant to political influences and pressures.

Reading 10: Economics of Regulation

LOS 10 (d) Describe classifications of regulations and regulators.