CIAO DATE: 07/02

Decentralized Cooperation and the Future of Regulatory Reform *

Faced with the fact of sweeping regulatory reform, how do companies decide how to respond to a new set of policies? This paper argues that this problem requires a new conception of policymaking: a conception that recognizes the analytical primacy of achieving coordination under uncertainty. I call this challenge the problem of securing decentralized cooperation. Negotiated reforms are a common leitmotif of the current wave of reforms taking place in various European countries, whereas American attempts to reinvent government opt to replace the state with the market. There are general lessons in this approach for both strategies. Unlike the earlier attempts to establish neo-corporatist bargains at the national level in European countries, the success of bargained pacts in Europe will depend increasingly on allowing private actors to design the best solutions to centrally identified problems. The challenges of bringing private information to bear on public policy will increase in the future, and not only in supply-side economic policy reforms. One such area is environmental regulation, which is typically viewed as an area of pure state regulation. This is also an area where market-based solutions are frequently proposed as the most efficient solution to problems of pollution. As I demonstrate through the initiative of the Chesapeake Bay Program in the United States, the challenges identified above for areas of economic policymaking are now relevant to environmental initiatives, even in liberal market economies such as the US and the UK. The extent of government success in such initiatives will be determined by the ability of governments to understand the importance of private information and their capacity to develop private sector institutions that can help procure it. Attempts to replace a malfunctioning state with a market solution, currently very much in vogue in certain quarters in the United States, will fail, as long as they do not recognize the distinctive problems inherent in securing decentralized cooperation.

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* This is a revised version of the concluding chapter from my book manuscript, Rethinking Reform: The Politics of Decentralized Cooperation in the Advanced Industrial Countries. An earlier version of this paper was presented at the European Political Economy Workshop on "Interests and Coalitions," held at the Center for European Studies at Harvard University in November, 1999. This draft has benefited from the comments of participants at that conference, as well as suggestions from Steve Casper, Orfeo Fioretos, Archon Fung, Peter Hall, Isabela Mares, Paul Pierson, and Fritz Scharpf. Thanks also to Jonathan Laurence, who provided research assistance.Back.