The Purposes, Organization, and Supervision of Regulators: Implications for Accountability and Liability
As recent events in the financial sector have demonstrated, the action or inaction of regulators can profoundly affect lives and livelihoods. It follows that regulators must operate within well-designed frameworks of accountability and liability.
In this policy brief, the author advances the theory of 'confirmation bias' to explain recent systematic defective regulatory decision-making and actions, and argues that accountability and liability frameworks for regulators must provide the appropriate incentives for regulators.
In this respect, it is argued that questions of regulatory accountability and liability cannot be separated from broader questions about the purposes of regulation (why we regulate); the external and internal organization of regulatory agencies (how we regulate); and regulatory oversight and supervision arrangements (who regulates the regulators).