The OECD highlights three tools for policymakers to improve regulatory outcomes.
The third edition of the Organization for Economic Cooperation and Development’s (OECD) Regulatory Policy Outlookcentrally focuses on ensuring that policymakers build policy on a sound evidentiary basis. OECD’s 2012 Recommendation on Regulatory Policy and Governance reflects the general agreement across OECD member countries of the importance of evidence-based policies. In the ensuing decade, OECD countries have either instituted or deepened their regulatory management systems, with a focus on three tools in particular: stakeholder engagement, regulatory impact assessment, and ex post evaluation.
Stakeholders, based on their lived experiences, can provide valuable input on the feasibility and practical implications of regulations. Policymakers providing members of the public the opportunity to help shape, challenge, and reform rules is important for improving the design and implementation of those rules. Stakeholder engagement can also build trust in government, strengthen democratic values, and encourage higher compliance with regulations, especially when stakeholders feel that policymakers considered their views.
Consultation on draft laws is now relatively well established across OECD countries, and it is acknowledged that consulting on draft rules is a crucially important tool. In recent years, governments had been increasingly undertaking consultations online, and this change accelerated with the COVID-19 pandemic.
In practice, however, stakeholder engagement tends to occur on a piecemeal basis. Fewer than one-quarter of OECD countries systematically consult citizens and businesses at early stages of policy making to gather data and ideas on potential policy solutions. Yet this step is exactly when their input can make the biggest difference in identifying appropriate policy options and ensuring rules work in practice. Not only does early engagement help create buy-in and support for resulting policies, but it also helps ensure that these policies are based on available evidence.
A persistent issue in stakeholder engagement is that around three-fifths of policymakers do not provide public responses to comments received during consultations. This absence of feedback leaves stakeholders in the dark about whether, and to what extent, their input has helped to shape resultant rules. And it may dissuade stakeholders from participating in future consultations.
In addition to providing an emphasis on stakeholder engagement, the OECD’s Regulatory Policy Outlook focuses on the importance of regulatory impact assessment. The OECD’s Best Practice Principles for Regulatory Impact Analysis already highlight how regulatory impact assessment supports decision making by providing objective information about the likely benefits and costs of policy proposals. A well-functioning system of regulatory impact assessment helps promote policy effectiveness, efficiency, and coherence by illustrating trade-offs within regulatory proposals. Regulatory impact assessments can help avoid regulatory failures by showing, for example, that reducing risks in one area may create risks in another or that unintended consequences would outweigh any purported benefits.
All OECD countries have regulatory impact assessments in place to assess some regulatory proposals. That said, room remains for countries to better harness impact assessment for decision making. Policymakers should comprehensively consider all feasible alternatives when developing proposals and consider solutions that avoid creating new laws or regulations. Too often countries still predominantly emphasize the preferred regulatory approach vis-à-vis alternatives—including the decision not to regulate. Governments have made little progress since 2014: If governments are required to assess alternative policy options that avoid regulation, they generally only consider one such option. Doing so, however, risks embedding a perception among both policy and decision-makers alike that regulation is always warranted.
Over the past decade, OECD countries have broadened the range of impacts they consider when developing policies. Yet they still tend to consider more economic factors, such as impacts on competition and budget, than non-economic ones, such as gender equality, environmental, or social impacts. Decision-makers must look at all relevant impacts to understand the potential effects of any proposed rule.
After countries adopt new rules, ex post evaluations can help ensure they continue to work and can improve future regulations. All rules are experiments. Governments rely on imperfect information to make rules that change the behavior of regulated individuals or businesses. When rules fail, a course correction is necessary. Even when rules succeed, contexts change so rules must be flexible enough to adapt and continue to benefit communities over time.
Ex post reviews provide opportunities to build on successes, learn from mistakes, and ultimately ensure that laws and regulations maximize community well-being over time. The OECD has developed best practice principles for reviewingthe stock of a country’s regulations that provide guidance on designing a sound ex post review system and conducting evaluations.
By conducting reviews, regulators can rejuvenate and realign regulations. Reviews provide reassurance that when governments step in, they do so for the right reasons—and for reasons that remain valid.
Many basic steps for ensuring that rules continue to deliver for the community, however, are simply absent from government decision-making. Fewer than one-quarter of OECD member countries systematically assess whether rules are working as intended. This means that governments never review a large number of rules and that a “set-and-forget” mentality still prevails. Countries are losing opportunities to ensure competitive, innovative, and dynamic economies.
Countries are also not currently using reviews as a vehicle for improvement or learning. Especially given the depth and breadth of rules introduced during the COVID-19 pandemic at great haste and in the face of great uncertainty, reviews will be central for governments to understand what has worked, what has not, and how to be better prepared for future crises.
Governments can help ensure they make better regulatory decisions by more consistently and effectively applying stakeholder engagement and regulatory impact assessments when making rules and by conducting ex post evaluations to ensure that rules continue to improve community wellbeing.
This essay is part of a nine-part series entitled, A Global Regulatory Policy Outlook.
This contribution builds on the publication OECD (2021), OECD Regulatory Policy Outlook 2021, OECD Publishing, Paris, https://doi.org/10.1787/38b0fdb1-en. The additional opinions and arguments employed herein are those of the authors and do not necessarily reflect the official views of the OECD or of its Member countries.