State Regulation of the Economy: Theory and Best Practices

Abstract

The article analyses the evolution of regulatory policy mechanisms in Russia based on an overview of theoretical aspects and OECD recommendations about best practices of government regulation. It offers alternative definitions of government regulation as an independent branch of economic policy that has been attracting ever more attention in recent years. The article analyses approaches to the optimization of government regulation taking into account market failures and market improvement opportunities, and makes a point that contradistinguishing government regulation from market regulation is unjustified. An observation is made that since regulation implies a certain degree of enforcement, the effectiveness of regulation largely depends on the amount of trust that society places in the government.
It is common knowledge that government regulation is examined, in both theory and practice, through the prism of not only public but also private interests. To secure advantages and benefi ts, certain interest groups attempt to influence the formation of government regulators, oft en to the detriment of public interests. This raises the question about the aspects of reasonable deregulation.
When it comes to choosing the practical course for improvement of government regulation, the recommendations of the OECD Regulatory Policy Committee (RPC), based on many years of analysis of regulatory performance in many countries, are invaluable.
Analysis of the evolution of Russian regulatory practices demonstrates that they are generally consistent with OECD recommendations. Superfluous regulatory functions of the government (unrelated to market failures) are scaled back, resulting in a reduction of administrative barriers and translating into business climate improvements. Market entry formalities are simplified along with control and oversight procedures applicable to business entities. Information transparency increases as regulatory requirements become more readily available and self-regulation improves. And yet further steps aimed at improvement of government regulation call for a deeper and more profound analysis and fundamental preparations in terms of creating information databases for a risk-oriented approach and making regulators really independent and more accountable.