A systems-thinking approach to regulation

Regulation is under attack. In major democracies around the world, the main set of tools used to protect the public interest from the excesses of private activity is being eroded. The starkest current example of this is in the United States, where the Trump administration has taken radical steps to reduce the powers and funding of dozens of domestic agencies including the EPA, the Department of Commerce and the Department of Health and Human Services. This deregulatory agenda is a core theme of conservative political groups around the world.

Since the era of Reagan and Thatcher a free-market economic philosophy, closely tied to a libertarian political ideology, has contended that a freely operating market unfettered by government interference will provide for all human needs. The political agenda driven by this belief is to minimise taxes and minimise regulation. By freeing businesses from these burdens, this approach intends to optimise the economy’s purported intrinsic capacity to meet all needs. Goods and services will be produced and brought to market at optimal prices, jobs will be created and profits will be generated for shareholders. Lived experience, however, has revealed problems with this utopian vision.

It turns out that a number of assumptions in the model were flawed. Economic rationalism assumes that consumers and producers will consistently make rational economic decisions. They don’t. Neo-liberal economic theory considers the indirect costs of production, such as the production of pollution and the depletion of resources, as ‘externalities’. Accounting for their economic, social and environmental costs is considered irrelevant and unnecessary. It’s not. It is assumed that rational self-interest will consistently drive owners of the means of production to optimise worker and consumer safety, and to minimise environmental damage. It doesn’t. It turns out that, in the absence of external pressure, the profit motive will often override intrinsic motivations for businesses to do no harm. Effective and efficient regulation of private activity is necessary if the public interest is to be protected.

Regulation does impose costs on business. These costs may be passed on to consumers and reduce business profitability. In order to maximise business profitability and productivity, whilst protecting the public interest, regulatory constraints should be as efficient and effective as possible in achieving their aims. A range of regulatory strategies and principles have been developed and implemented during the era of deregulation, since the late 1970s. These have included various mixtures of government regulation and industry or organisational self-regulation. The resulting array of regulatory regimes across different industries includes those where multiple agencies (some government-auspiced, some industry based and some third party) impose multiple sets of regulatory requirements, expectations or suggestions on businesses. There may be close coordination between these regulatory instruments, or there may be none. In both the research and practice of regulation, there appears to be no widely accepted systematic method for evaluating, reforming and designing regulatory systems in a way that offers confidence about the capacity of the resulting system to achieve its regulatory purposes.

In a typical Australian State, Victoria, various types of led outdoor activity providers are subject to a range of regulatory instruments including Adventure Activity Standards, Tour Operators Licensing and Camp and Adventure Activity Accreditation. Whilst many of these regulatory instruments apply only to a specific subset of service providers and most of them are voluntary, there is no clear coordination between them and there is often confusion among service providers about their regulatory obligations. To maximise the effectiveness and efficiency of this regulatory environment, a holistic approach is needed. Systems thinking may offer just such a holistic view that would support system reform to allow coordinated interaction between the various regulatory instruments and the identification and resolution of whole-of-system weaknesses, such as missing system functions or unwanted redundancy. These improvements in the system’s structure would improve both efficiency and effectiveness.

My research applies analysis and design methods from sociotechnical systems theory and practice to the Victorian led outdoor activity safety regulatory regime. It consists of a series of studies to firstly test the suitability of systems theory for application to this problem, secondly to test and employ a specific analysis method, Cognitive Work Analysis (CWA), and finally to apply a design method based upon CWA, wherein led outdoor activity providers and regulators will collaborate in facilitated design workshops to develop system improvements, informed by the findings of the analysis.

If my research is successful in producing design improvements to support an improved regulatory system for led outdoor activities, it will offer a method for evaluating and designing regulation that is more reliable and cost-effective than prevailing methods. This method may be applied more broadly to improve how safety, environmental impacts and financial transactions are regulated in a way that improves outcomes for both regulated communities and for the wider public.

Tony Carden is a PhD candidate within the Centre for Human Factors and Sociotechnical Systems


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