3.2. Recommendation with Regards to Accountability

♤ Avoid conflicting objectives: This problem is heightened when there are conflicts of interest. It is, hence, desirable to structure regulatory bodies with clarity of purpose and the absence of conflicting objectives.

♤ A well structured rule-making process: To ensure that the benefits of the regulations out weigh the costs, for every proposed regulation there should be:

o A compact statement of the objects and reasons of the subordinate legislation;

o A description of the market outcome, which is an inefficient one (“a market failure” in

Economics parlance);

o Demonstration that solving this market failure is within the objectives of the regulator;

o Clear and precise exposition of the proposed intervention;

o Demonstration that the proposed intervention is within the powers of the regulator;

o Demonstration that the proposed intervention would address the identified market failure;

o Demonstration that the costs to society through complying with the intervention are outweighed by the gains to society from addressing the market failure.

♤ The Rule of Law: A crucial element of accountability and independence of regulators is three core principles of the rule of law:

o Laws should be known before an action takes place.

o Laws should be applied uniformly across similar situations.

o Every application of law should provide the private party with the information for application of the law, the reasoning by which the conclusion was arrived at, and a mechanism for appeal.

♤ Reporting: Once the objectives of an agency have been defined, it is meaningful to ask the agency to report – e.g. in the Annual Report – the extent to which it has achieved these objectives. Each agency should report on how it has fared on pursuing its desired outcomes, and at what cost.