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Regulatory Administrative Institutions MPA 517 Lecture-2 1.

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1 Regulatory Administrative Institutions MPA 517 Lecture-2 1

2 Recap A regulation is a rule or law designed to control or govern conduct. In statist mechanisms, it can also be extended to monitoring and enforcement of rules as established by primary and/or delegated legislation. In this form, it is generally a written instrument containing rules having the force of statist law (as opposed to natural law). Other forms of regulation are self regulation 2

3 Capitalism & State social institutions Capitalism is an economic system in which trade, industry, and the means of production are controlled by private owners with the goal of making profits An important feature of socialist states is the existence of numerous state-sponsored social organizations (trade unions, youth organizations, women's organizations, associations of teachers, writers, journalists and other professionals, consumer cooperatives, sports clubs, etc.) which are integrated into the political system 3

4 Today’s Lecture Why Regulations? Types of regulations Importance of regulation in country 4

5 Why Regulations Regulation creates limits, constrains a right, creates or limits a duty, or allocates a responsibility A regulation or administrative rule, issued by an organization, used to guide or prescribe the conduct of members of that organization; can specifically refer to acts in which a government or state body limits the behavior of businesses 5

6 Types of Regulations Regulation can take many forms: legal restrictions promulgated by a government authority, contractual obligations that bind many parties (for example, "insurance regulations" that arise out of contracts between insurers and their insured) 6

7 Self-regulation Self-regulation by an industry such as through a trade association, social regulation (e.g. norms) In its legal sense, regulation can and should be distinguished from primary legislation (by Parliament of elected legislative body) on the one hand and judge-made law on the other 7

8 Certification Certification does not refer to the state of legally being able to practice or work in a profession. That is licensure. Usually, licensure is administered by a governmental entity for public protection purposes and a professional association administers certification. Licensure and certification are similar in that they both require the demonstration of a certain level of knowledge or ability. 8

9 Co-regulation a "continuous unfolding of individual action that is susceptible to being continuously modified by the continuously changing actions of the partner." An important aspect of this idea is that communication is a continuous and dynamic process, rather than the exchange of discrete information 9

10 Third-party regulation Some regulatory bodies designate third parties to provide approvals for specific types of products before they are allowed to be sold and/or used in the specific regulator's area of responsibility. 10

11 Example PTA and State Bank of Pakistan The introduction of third party payment networks also known as MPSP (Mobile Payment Service Providers) would be of immense advantage since these third- party payment handing agents can work with many providers, rather than the closed networks. We could foresee opportunities for service providers (both from Banks and Mobile Sector) who move quickly to create new products, especially if they can establish shared networks of third party agents. 11

12 Importance Regulation mandated by a state attempts to produce outcomes which might not otherwise occur, produce or prevent outcomes in different places to what might otherwise occur, or produce or prevent outcomes in different timescales than would otherwise occur. In this way, regulations can be seen as implementation artifacts of policy statements 12

13 Example of Regulations Controls on market entries Prices Wages Development approvals Pollution effects Employment for certain people in certain industries Standards of production for certain goods Military forces and services 13

14 Regulatory economics The economics of imposing or removing regulations relating to markets is analysed in regulatory economics Regulatory economics is the economics of regulation, in the sense of the application of law by government for various purposes, such as centrally-planning an economy remedying market failure enriching well-connected firms or benefiting politicians It is not considered to include voluntary regulation that may be accomplished in the private sphere 14

15 Summary Why Regulations? Types of regulations Importance of regulation in country 15

16 Next Lecture Regulatory economics Regulatory Capture Externality Negative externality Positive externality 16

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