dr. andré nijsen adviser regulatory reform 1 standard cost model 2.0 workshop sonnenfels center...
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Dr. André Nijsen Adviser Regulatory Reform
1
Standard Cost Model 2.0Standard Cost Model 2.0
Workshop Sonnenfels Center WienApril 11 2011
IssuesIssues
What is SCM 1.0? Looking back: origin of SCM 1.0 Taking stock: lessons learned Where does the SCM 1.0 stand? Where to go: SCM 2.0? Summary and Conclusions
What is SCM 1.0?What is SCM 1.0?
Policy instrument to measure compliance costs of legal information obligations (IOs)
Compliance costs of IOs = administrative burden (AB)
SCM is a P(rice) xQ(uantity) model AB = P (costs per message) x Q
(number of messages)
Red tape has significant impact Red tape has significant impact on the economyon the economy
4
Source: SCM network and Danish Commerce and Companies Agency
DirectDirect compliance costs compliance costs
Financial obligations
Information obligations to government
Administrative burdenRetributions, taxes,
premiums, legal dues, fines
100% marginal costs
Business Effects of RegulationsBusiness Effects of Regulations
Secundairy compliance effects
Social-economic effects
Competition
Substantive obligations
Costs of investments and adaptation
Partial business as usual costs and marginal costs
100% marginal costs
Looking back: origin SCM 1.0Looking back: origin SCM 1.0
Origin: Mistral® = Measuring InSTRument Administrative Burden (Burden = Last in Dutch)
Developed in the Netherlands: 1992-1994 Funded by Ministry of Economic Affairs Focus on improving business climate 1994: AB reduction policy part of Coalition Agreement Cabinet
Kok I 2000: Mistral® methodology accepted by Dutch Cabinet and
renamed Standard Cost Model (SCM) From 2003 onwards spread to Denmark, UK, Sweden, Norway,
Belgium, Germany, Austria, 2006/7/8: declared best practice by OECD, World Bank, EC 2011: SCM in over 20 countries
Taking stock: lessons learned (1)Taking stock: lessons learned (1)
Sources:1. My own practical experiences (1992-2011)2. Cutting Red Tape II: OECD (Allio, Renda,
2010)3. SCM experiences in OECD Countries; 2002-
2009 (Nijsen, 2010)4. The SCM: a critical appraisal (Weigel, 2008)
Taking stock: lessons learned (2)Taking stock: lessons learned (2)
Main issues:1. Institutional setting reduction policies2. Organisation/management project3. Methodology4. Too narrow scope?5. Results AB reduction policies
Taking stock: lessons learned (3)Taking stock: lessons learned (3)
Institutional setting reduction policies:
1. Ex-ante and ex-post2. Scope (coverage laws and sectors)3. Reduction targets 4. Ensuring policymakers understand and
accept results5. Training6. Central data base
Taking stock: lessons learned (4)Taking stock: lessons learned (4)
Organizational patterns and project management:
1. Central watch dog2. One ministry in charge (principal)3. One consortium as project manager4. Relevant to invest in consortium
Taking stock: lessons learned (5)Taking stock: lessons learned (5)
Methodology:1. Concept of AB: ‘real’ or standardised costs (typical firm)?2. Focus on exogenous determinants of AB-> law3. Measurement unit: business or IO?4. Presumption: normally efficient firm->standardising
endogenous determinants of AB5. Full or real compliance?6. What about business as usual costs? (sheet 5 and 12)7. Validity, reliability and representativeness (sheet 13)8. How to tackle the problem of AB, being hidden costs? (sheet
14-15)
Composition of substantive Composition of substantive compliance costscompliance costs
Law Transport dangerous products
Substa
ntiv
e
com
plia
nce
costs
Substa
ntiv
e
com
plia
nce
costs
Law to check identity new employees
Law Employees Council
= Business as usual costs = Marginal costs
Substia
ntiv
e
com
plia
nce
costs
Base line
Taking stock: lessons learned (6)Taking stock: lessons learned (6)
Too narrow scope of the SCM?1. Main argument for quick spread of SCM: focus
on efficiency (politically neutral) and not on effectiveness (achieving public goals)
2. Possible extensions: other compliance costs, benefits, enforcing costs
3. Keep focus on exogenous determinants (law) by standardising endogenous determinants of compliance
4. Step by step approach: start with AB
Taking stock: lessons learned (7)Taking stock: lessons learned (7)
Lack of succes of AB reduction policies1. Is SCM to blame for that?2. Argument: risk of cutting down AB
without C/B or C/E analysis3. SCM is not prescriptive. To cut down AB
is a political decision4. Succes of reduction programs depends
on political will5. Main risk of every AB reduction
program is neglecting business preferences
Where does SCM 1.0 stand? (1)Where does SCM 1.0 stand? (1)
SCM 1.0 is part of the RIA family SCM 1.0 is a cost-assessment But it’s a special one because of
standardising endogenous determinants of AB
SCM fits well into the main stream of theories on policy making
Where to go: SCM 2.0? (1)Where to go: SCM 2.0? (1)
There are more rationalities simultaneously involved in the process of law making:
1. Political rationality (power)2. Legal rationality (legitimising)3. Economic rationality (payability)4. Technical-social rationality (feasibility and
public support)• Political rationality is dominant mostly
Where to go: SCM 2.0? (2)Where to go: SCM 2.0? (2)
In societies were the political rationality is dominant, there is a serious risk of bad regulation. This risk is even more serious, if regulation deteriorates to a tool to achieve and retain political power. Regulatory tools can help to warn about and prevent from this risk of political rationality. The question is: how could a next generation of the SCM - SCM 2.0 - help to tackle the major externalities of the modern risk society? Part of this is how to handle the predominance of political rationality during the process of policy-making?
Where to go: SCM 2.0? (2)Where to go: SCM 2.0? (2)
Possible steps for SCM 2.0:1. Extension with modules for other compliance
costs2. Extension with modules for benefits3. Extension with modules for enforcing costs4. Developing a facility to repress the political
rationality during the legislation process
Summary and ConclusionSummary and Conclusion
I told you about mine and others experiences with SCM 1.0 and the lessons learned
Keep in mind: SCM 1.0 is an ‘if-than model’, if businesses are complying in an efficient way than the costs will be x
Possibly there will be opportunities to extend SCM 1.0 to SCM 2.0: if businesses are complying in an efficient and effective way than the costs and benefits will be x and y
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