Smarter regulation through experiments

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Smarter regulations through experiments

Peter Achterstraat AM - NSW Productivity Commissioner

Good regulation provides the platform for the economy community and environment to flourish. We trust that it's safe to drive on our roads that, water is safe to drink, that we can go to work and be paid and that we can confidently spend and invest.

Government intervention through regulation may be needed to give people this confidence. For example, government made seat belts in cars compulsory to improve safety. 

Regulation also plays a crucial role in reducing inequality. Some members of the community are more physically financially or otherwise vulnerable, so we have
regulations that address inequality such as requiring fair access to public buildings for all people. 

But regulations can be costly. If regulations become unnecessary or outdated, they make it harder for businesses to operate and they can create barriers to new and innovative businesses or technologies. For example, drones offer opportunities to make work in a range of industries, from farming to construction safer and more efficient. Simplifying the regulations around their use could help us seize the opportunities for new technologies to improve productivity.

I believe it's important that government agencies remain focused on continuously improving regulation. This means asking if a current regulation is still the best approach for addressing an issue or if there are more effective lower cost ways.

As part of this ongoing review process,  we should also consider using regulatory experimentation, safely testing new and planned changes to regulations, to help make the case for change. The COVID-19 pandemic changed the way we did a lot of things. We temporarily relaxed some of our regulations to help people do their work, such as allowing nighttime deliveries, online strata meetings, and digital signatures. Some of these changes have become permanent, which we have estimated would boost the NSW economy by $3.1 billion over 10 years.

 This is proof that better regulation can help us achieve a more productive fair and prosperous future for the people of NSW.

About the paper

Efficient and effective regulation is critical for public wellbeing and a productive economy. To improve regulation, regulators are increasingly adopting a technique called regulatory experimentation – safely testing changes to rules to see if they achieve better outcomes.

Building on the success of the NSW Government’s COVID-19 regulatory relaxations, our paper serves as a simple, accessible resource for regulators seeking to experiment to drive best-practice regulation.

Drawing on real-world case studies, the latest research, and interviews from organisations with first-hand experience conducting regulatory experiments, our paper offers insights into the benefits and challenges of testing policy options, as well as practical steps regulators can take to start experimenting.

Key findings

• Regulators use a range of experimental methods and techniques, varying in the expertise and resources required to implement them. These include before-and-after studies, randomised controlled trials, quasi-experiments and regulatory sandboxes.
• Experiments can drive better regulation by allowing regulators to:
  • respond to risks and adapt to a changing regulatory environment
  • facilitate the safe and measured introduction of new technologies
  • find more cost-effective ways of regulating
  • gather evidence to overcome opposition to change.
• Regulatory experimentation is not a one-size-fits-all approach and may not always be practical, for instance if the necessary data cannot be collected.
• Well-designed regulation is forward-looking, with data collection and evaluation processes built in as part of implementation.
• To build confidence and support for regulatory experimentation, regulators can:
  • foster a culture of experimentation by starting with small wins, incorporating trials into business-as-usual activities, and sharing results to normalise experimentation
  • develop their expertise by making use of accessible online tools, collaborating with experienced project partners to grow skills, and making use of available guides and resources
  • gain support from senior leaders by ensuring the scope and objectives of regulatory trials are thoroughly mapped out.

See our regulatory experimentation toolkit for case studies, guides and research to support regulators to experiment.