Page 202 - ES 2020-21_Volume-1-2 [28-01-21]
P. 202

Process Reforms: Enabling decision-making under uncertainty  185


             in which they can be interpreted. This is made worse by the opacity of increasingly complex
             rules which makes it difficult for a third party to monitor how the discretion was exercised.
             Black  (2001) argues that  “discretion  and rules are not in a zero-sum relationship  such that
             the more rules there are the less the discretion there is and visa-versa.” In short, a complex,
             uncertain world makes discretion inevitable where over-regulation, not simpler regulation, leads
             to excessive and opaque discretion.

             Evidence supporting the increase in discretion with over-regulation

             6.10  In their book “In Regulating Aged care: Ritualism and the New Pyramid”, Braithwaite et.al.
             (2007) study the healthcare sector in the United States and provide evidence that is consistent with
             the above thesis. The book focuses on the impact of regulating care for the elderly. It was argued
             that inspectors manning the aged care homes had a lot of discretion. To change this scenario
             and reduce their discretion, the inspectors were provided with detailed protocols to audit. These
             standards were further broken into sub-standards and had reached over 500 federal standards,
             which were complemented by some state’s specific standards by 1986. For instance, the Illinois
             code for nursing included over 5,000 care regulations. Consistent with the bounded rationality
             posited above, the authors found that inspectors could not cope up with the rise in these number
             of standards. Most of these standards were completely forgotten and only about 10 per cent of
             the standards were repeatedly used to make norms. The study notes that the results depended
             on the background of inspectors, such that “If you’ve got a nurse, it will be nursing deficiencies
             in the survey report; if a pharmacist, you’ll get pharmacy deficiencies; a lawyer, patient rights,
             etc.” The complex set of rules, in fact, gave more discretion to the inspector. Because of having
             complex and a large number of standards to check, idiosyncratic factors associated with the
             narrow expertise of the inspector caused particular standards to be checked in some homes,
             but neglected in others. Thus, the over-regulation caused endemic unreliability and defeated
             the whole purpose of having detailed regulations. The timelines associated with closing a clean
             company with no litigation/ dispute, which is described in Table 3 above, represent an example
             of this problem.

             6.11  Similarly, Figures 3 and 4 provide large sample evidence across Indian states supporting
             the thesis that discretion increases with the amount of regulation. The evidence is adapted from
             Raj et al. (2018) who use the World Bank’s Enterprise level surveys for India to undertake their
             analysis. In figure 3, the variation among firms in the actual days taken to provide a construction
             permit as a function of the number of de jure days taken to provide a construction permit, as per
             the regulatory rules for the same in the state are plotted. We see that an increase in the number
             of regulations, which is proxied by the increase in the de jure days to get the permit, correlates
             positively with the variation in the actual number of days taken. As variation against the de jure
             norm proxies the discretion exercised across the various applications from the firms, this shows
             that more the number of regulations, higher the discretion in implementing them in the case
             of award of construction permits. Figure 4 shows the same using the days taken to provide an
             operating license for a facility. Collectively, both these figures provide evidence consistent with
             the thesis that discretion increases with the number of regulations.
   197   198   199   200   201   202   203   204   205   206   207