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Optimal Level Of Regulation In Society

When a government regulates our activities, it must ensure that the restrictions imposed on our freedoms serve a proven good purpose – in terms of increasing accountability and justice.

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When a government regulates our activities, it must ensure that the restrictions imposed on our freedoms serve a proven good purpose – in terms of increasing accountability and justice.

The only objective way of testing the claims of a regulatory intervention or other government action are through a proper cost-benefit analysis.

True, the idea of conducting a (social) cost-benefit analysis on matters related to health, education and environment, among others, can raise many curly questions both at the philosophical and practical level.

In particular, the implicit utilitarianism of such analysis can be bothersome, and it has often been too easy to use a cost-benefit approach to reduce our freedoms unnecessarily. It also involves valuing everybody’s preferences equally, and that, too, is a major problem (except that we must all be equally free hence our freedoms must be valued equally).

Unintended consequences of regulation or other government  intervention can also contaminate a cost-benefit analysis [the policy approaches to eliminating corruption highlighted by Baba Ramdev come to mind, but also the entire socialist rigmarole in India].

Having said that, there is no better tool of decision making than cost-benefit analysis, that can be used transparently (objectively) by public policy makers. At the very least this method forces one’s assumptions into the open and highlights potential weakness of the analysis. It is better to know precisely what we don’t know than to rush into government interventions on the basis of our gut feel for what might work.

Despite cost-benefit analysis,some decisions will remain very hard. However, if we weigh the results of such (cost-benefit) analysis against the requirements of freedom, then a good judgement could potentially be formed to suitably frame  regulatory interventions.

Rules of thumb for use of cost-benefit approaches

The following basic rules of thumb should apply to all regulatory activity:

Benefits should exceed costs (B>C) for all regulation. Net benefits (B-C) should be as high as possible.

The marginal benefit to cost ratio should be equalised for all regulatory activity. Thus, the incremental cost imposed on society to save one life in the workplace should be the same incremental cost imposed to save a life on the roads or in the air (or through terrorist activity).

All regulation should be periodically reviewed to increase B and to decrease C further, thus increasing the B/C ratio, and increasing net benefits to society.

Only a certain level of regulation is ‘optimal’ – there should be neither more nor less.  

The diagram below shows how the net benefits of regulation can be increased by reducing costs:

It also cautions against excessive use of regulation by showing that there is an optimal quantum of regulation in society. (This is similar in concept to the diagram I showed in this blog post in relation to the optimal size of the public sector.)

Courtesy: Sanjeev Sabhlok’s Ocassional Blog
This article was first published on Nov 26, here

 

Disclaimer: The views expressed in this writing are solely of the author and do not necessarily reflect the views or policies of League of India, its Editorial Board or the business and socio-political interests that they might represent.


Sanjeev Sabhlok has a doctorate in economics from the University of Southern California. He joined the Indian Administrative Service (IAS) in 1982 and resigned in January 2001 to pursue possible political and other goals. He now works in the Australian public sector in regulatory policy.


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Consultations Begin on the New Industrial Policy

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Commerce and Industries Minister Suresh Prabhu set off a series of nation-wide consultations with the industry on the proposed new Industrial Policy. The first consultation was held at Guwahati on February 02. The event, organized by Department of Industrial Policy and Promotion (DIPP) in partnership with Federation of Chamber of Commerce and Industry (FICCI), was attended by more than 120 industrialists from the North East in addition to government officials from the North Eastern States.

In his speech, the Minister emphasised that this exercise is done after 25 years truly listens to and objectively equips Indian industry for the future. The prior attempts in 1956 and 1991 were formulated at a time of financial crisis.

The minister underscored how the government was coming to the industry to understand their concerns rather than the other way around. The Minister stressed the focus of the government to make business easier for the industry.

Mr Prabhu highlighted multiple initiatives of the government to reduce the burden of regulations for the industry. He also talked about the importance of centre-state cooperation and the need for change even at the district-level.

The event was also attended by Mr Chandra Mohan Patowary, Minister of Industries & Commerce, Government of Assam. In his remarks, Mr Patowary emphasized the North East region’s potential as a gateway to South East Asia.  He  highlighted the need for an  Industrial Policy for the North East

Ms Vandana Kumar, Joint Secretary DIPP, made a detailed presentation on the key highlights of the future policy. She mentioned the dual challenge of dealing with existing issues and in preparing the industry in the wake of global mega-trends such as servification, industry 4.0, responsible industrialization and rising protectionism.

The New industrial policy envisions to create a competitive Indian industry that is equipped with skill scale and technology.

Ms Kumar also highlighted some of the key ideas such as a single ID and digital platform for all G2B services across the business lifecycle, paradigm shift toward self-certification and third-party certification, plug and play infrastructure for SMEs, privatizing maintenance of industrial estates and creating a national R&D vision.

Puneet Dalmia, Chairman FICCI Manufacturing Committee stressed the need to bridge the trust deficit and further the ease of doing business. Mr Atul Chaturvedi, Additional Secretary DIPP, Dr Sanjay Baru Secretary General FICCI, Dilip Chenoy Director General of FICCI were also present.

The session concluded with a vibrant Q&A session moderated by Dr Sanjay Baru SG FICCI with the industries, who highlighted their wishes and concerns.

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NCERT Proposes Uniform Syllabi for Sr Secondary Maths, Science

The National Council of Education Research and Training (NCERT) has developed core syllabi in Science and Mathematics at the higher secondary level and a core syllabus in Commerce would be completed by next month.

The idea is to provide a level-playing field to all students to join professional courses, HRD Minister Kapil Sibal said in Rajya Sabha today. 

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The National Council of Education Research and Training (NCERT) has developed core syllabi in Science and Mathematics at the higher secondary level and a core syllabus in Commerce would be completed by next month.

The idea is to provide a level-playing field to all students to join professional courses, HRD Minister Kapil Sibal said in Rajya Sabha today. 

He said 21 educational boards had earlier agreed to adopt a core curriculum in science and mathematics at secondary level following a consensus arrived on this issue at the Central Advisory Board of Education (CABE) meet in August 2009 to bring uniformity in these streams.

"Accordingly, NCERT has developed core syllabi in Biology, Physics, Chemistry and Mathematics at higher secondary stage in collaboration with Council of Boards of Secondary Education and CBSE," he said.

Sibal said the core syllabus for Commerce stream is likely to be completed by next month. 

In August 2009, CABE had emphasised the need for all states to modify their curriculum, syllabi and textbooks on the basis of NCF-2005. 

"It also endorsed the need for a core curriculum in science and mathematics at secondary and higher secondary levels across all Education Boards in the country, so as to provide a level playing field to all students to join professional courses," Sibal said during the Question Hour. 

However, he once again made it clear the government has no proposal to enforce a uniform school curriculum. 

Sibal had earlier said all the 30 boards in the country have their own points of view and in such circumstances it was difficult to implement a uniform school curriculum at secondary and higher secondary level.

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Renowned Sportspersons to Suggest Ideas On Sporting Infrastructure

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The Sports Ministry has constituted a committee of renowned Indian sportspersons to suggest the ways for best utilization of sporting infrastructure created by the Sports Authority of India( SAI) for the Commonwealth Games. This was disclosed by Shri Ajay Maken , Sports Minister , while briefing the media persons after taking round of five Stadia of SAI , here today morning.

Disclosing the composition of the Committee, Shri Maken said “ the Committee consisting of renowned sports persons and veteran sports journalist has been asked to suggest , how best we can utilize the existing sporting infrastructure .” He further informed that the Committee will be chaired by Sports Secretary and comprise of Ms P.T.Usha , Mr Bhaichung Bhutia, Ms. MC Marykom, Mr Dilip Tirkey and veteran Sports Journalist Mr K. Dutta. It has been asked to give its recommendations within four weeks. The Committee would be holding its first meeting on Monday, Shri Maken added.

Today morning , Shri Maken accompanied with Sports Secretary, DG ,CPWD and senior officers of SAI & CPWD has visited Dr SPM Swimming Complex , National Stadium, IGI Complex, JNL Stadium and Dr Karni Singh Shooting range to see himself the status of maintenance of above sporting infrastructure .

Responding the question of media persons about the utilization of Sports infrastructure , Shri Maken categorically stated that SAI stadiums would used for following three purpose only,

          (a) For running Sports Academies for imparting training to children.

          (b) hosting National & International competitions , for which annual calendar will be prepared .

          (c) National teams training for London Olympics.

Commenting on the state of maintenance level in the Stadiums, Shri Maken said the Sports Ministry has decided to hand over three stadiums to NDMC for cleaning and scavenging and other two stadiums would be maintained by the SAI. In response to a question regarding training of National Teams for London Olympics , Shri Maken said ‘ What we can’t do at the time of CWG , we should do for London Olympics and for this SAI is in active discussions with Sports Federations and with DDA also for teams stay arrangements. Very soon, we will come out with blue print.”

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