Home » Posts tagged 'Regulation'

Tag Archives: Regulation

Sign up to the Barefoot Economist’s Newsletter

© Barefoot Economic Services

All content on this website (unless otherwise specified) is copyright of Barefoot Economic Services. Please acknowledge any content used in your work appropriately. Thank you for your consideration.

Red Tape and Social Impact

 

Summary

Red tape (i.e. regulatory burden) reduction has been a focus for governments in recent years. However, the focus has been on the private commercial sector and has largely ignored other sectors. In this post I will discuss the red tape imposed on social service organisations. The red tape has implications beyond increasing costs for social service organisations. At worst, it could provide perverse incentives for social service organisations to focus on process and outputs rather than producing and measuring genuine social impact.

(more…)

Investment Approach to Deregulation

Image: Red tape.

Image: Red tape.

Last week, the consulting firm Deloitte’s released a new report titled, Get out of your own way: Unleashing productivity as part of their ‘Building the Lucky Country’ series. One of the main results was that Australian businesses imposed more red tape on themselves than the government does. Deloitte’s quantified the annual cost of self-imposed $155 billion compared to $94 billion from government-imposed regulation. Furthermore, this cost is associated with the growing ‘compliance sector’ that replaced the back-office staff that had been shed as a result of improvements in technology. So Australian firms have effectively spent their productivity dividend on beefing up their compliance capacity rather than concentrating on core activities. Deloitte’s attributes the growth of the ‘compliance sector’ to the growing risk-aversion among large Australian corporates to avoiding ‘stuff ups’. I generally found it an interesting report, although I thought it brushed over an important point: imposing rules is an implicit investment decision. I want to go through this important point in more detail in this post.

(more…)

Study of Incentives wins the 2014 Nobel Prize in Economics

I was so excited to find out this morning that Jean Tirole won the 2014 Nobel Prize in Economics. When I think of Prof. Tirole, I usually think of him together with his long-time collaborator, Jean-Jacques Laffont, who unfortunately passed away in 2004. Together, Tirole and Laffont wrote some insightful economic analysis that has heavily influenced my thinking on economics and, judging from the tributes (e.g. here from Justin Wolfers), many other economists. So, my excitement was tinged with a bit of sadness that Prof. Laffont did not see this day when the hard work of him and Prof. Tirole was recognised as worthy of the Nobel Prize. There work, applied game theory, principal-agent theory, asymmetric information and contract theory to how markets in the real world work. They did this by understanding the incentives between buyers and sellers in these markets instead of assuming that all markets were perfectly competitive. And, importantly they also looked at if it was feasible if government could intervene in markets that were imperfect. Tirole and Laffont have definitely influenced many regulators and policy-makers, and I’m glad Prof. Tirole won the Nobel Prize now because I think some of his and Laffont’s insights bear repeating. (more…)