Wednesday, October 14, 2009

Distinction Between Regulatory Supervison And Industry Regulation

A Financial Times article makes a valid distinction between government regulation of an industry and government supervision of industry. Successful regulation protects the public interest, while government supervision is ineffective shadow management.

John Kay, in a Financial Times article on October 13, 2009, "How the skies proved the limits of regulation," discusses how regulatory supervision requires knowledge of the industry, leads to regulatory capture and government employment of industry insiders. Regulations does not require regulators have industry knowledge because their goal is to protect a public interest and does not require that the regulators have industry experience.
Supervision is shadow management with a public interest orientation, its purpose to ensure universal adherence to good behaviour. Regulation is narrowly focused on specific issues of public concern. Supervision demands knowledge of the industry, regulation demands knowledge of the public interest and public concerns.
Read the complete article here.

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