16 - Privatization of Regulation: Promises and Pitfalls

Summary

When we think about “regulation” – that is, a sustained and focused control mechanism over valuable activities, using rule setting, rule monitoring and rule enforcement – the first image that comes to mind is a public administrative agency. However, over the past three decades, private entities have gradually assumed greater and greater regulatory roles. When we send our children to schools, the quality of education as well as their safety and health are often monitored by private auditors. When they are sick and must be taken to an emergency room, the standards of treatment are in many hospitals determined by a private organization. When we buy them a toy, it is usually a product made by workers in developing countries whose labor conditions are evaluated by a nonprofit organization, and in factories whose environmental standards are defined by a private industry association.