Book Review By Gergana Yankova-Dimova, University of Cambridge

The book “The New Regulatory Space” delivers a masterfully well-reasoned defense of regulation. The regulatory space is analyzed with regard to four systems of authority–the market, democratic politics, the law, and social norms. The book outlines and defends the contributions of the regulatory space to each of them. The market and the regulatory space embrace, because the regulator represents missing interests and voices in the market and promulgates societal goals that extend beyond the market. The regulatory space corrects democratic politics in the cases where the electors are incompetent, the issues are not contentious and voices do not count equally. Societal goals might be better achieved through regulation rather than the law, because regulation offers more opportunities for amicable settlement against the more adversarial legal settlements and because regulators are better equipped to adjudicate over complex issues grounded in the natural sciences. Finally, regulation offers a remedy for the cases when societal norms are weakened and society becomes less coordinated and predictable.

This book should be credited for rising so boldly and convincingly against the dominant prejudices about the regulatory space. In a literature and, in fact, a world that is saturated with skepticism about regulation, this book opens up analytical perspectives for rethinking that skepticism fundamentally. The author acknowledges that his writing is an “uncomfortable reminder” (page 146). For example, one of the biggest concerns is that regulation is a less representative and democratic way to coordinate societies than electoral politics. The author argues that regulation can correct some unrepresentative aspects of representative politics, such as the nexus between wealth and politics, the under-representation of minorities and the short-sightedness of politicians (page 89).  Paradoxically, regulators are non-representative bodies that step in to correct the inefficiencies of representation.

“The New Regulatory Space” very skillfully walks the fine line between acknowledging the merits of regulation and downgrading the contributions of alternative systems of coordination. It coins the term “integrity” for the systems of coordination to convey the idea that the relationships between these systems does not need to be a zero-sum game. But, although the book says that it does not pass judgment on the superiority of alternative systems of authority, it definitely delivers a more pronounced judgment over the value of regulation than the author’s previous book, “The Rise of the Unelected.” The latter was more concerned with the value of regulation in terms of its skillfulness in the natural sciences, while his latest work is more comprehensive, more normative and more openly critical about alternative systems. For example, it says that the market is a source of universal dysfunction, because both price formation and contract arrangements, which are the two constitutive forms of market relationships, are “imperfect” (page 137). Social norms are imperfect because they are difficult to observe and to impart (page 146). One of Vibert’s achievements is that he has managed to be critical without being dogmatic. Most of the balance in the argument stems from the meticulousness of the method of reasoning. Methodologically, the book is a tour de force, because it provides the first analytical roadmap for dealing simultaneously with the complex interrelations between the regulatory space on the one hand, and law, norms, politics, and the market on the other hand. Because this comparison has never been undertaken before, Vibert coins the criteria. He provides the vocabulary to talk about this problem (integrity of systems, universal dysfunction). The book is rife with analytical subcategories, classifications and refinements. For example, Vibert evaluates the regulatory space in terms of its presumed inferiority, its distinctive appeal and its dynamics. He differentiates between four different meanings of inferiority–sustentative inferiority, normative inferiority, inferiority defined as dependence, and inferiority defined as efficiency. He outlines five ways in which normative inferiority “crowds out” other systems that results in normatively less desirable results. Furthermore, he differentiates between dependence in terms of subordination and dependence in terms of conditionality. Another advantage of the method is that it draws its empirical examples from a large range of disciplines and goes well beyond the convenient defense of regulation in the midst of the 2008 financial crisis. In a rare show of breadth of erudition, it is equally well-versed in issues of political philosophy and public policy.

The originality of the theory is largely rooted in the originality of the puzzle that Vibert assembles, namely what the ultimate system of authority that guides the five interconnecting systems of authority is. Previous work has compared selectively and rather one-sidedly the virtues of the law versus democratic politics and each one’s relationship to regulation, but this is the first analysis that links and compares all these systems of authority and makes inferences about the dynamics between them. I believe that such an integrative approach should set the new standard for the upcoming research on democratic governance and democracy as a whole.

There are two issues upon which the book could expound. The first question is: what is new about the “new” regulatory space? Arguably, the new regulation is a response to the fragmentation of society that the book consistently underscores. Presumably, there are many reasons for the diversity of society. Some are permanent and relate to fundamental specialization of the spheres of life, such as the market and the law. Other reasons for societal fragmentation are more transient, such as urbanization, which the author mentions. Since the book is called the “new” regulatory space, presumably the transient factors underlying fragmentation outweigh the previously existing causes for fragmentation.

The second point of clarification relates to the definition of the regulatory space. The term “regulatory space” is fraught with certain ambiguity with regard to the balance between elected and unelected officials. It is said to simultaneously encompass government officials and private bodies that have either independently usurped authority from elected officials or have voluntarily been granted such authority to become regulators. As such, regulatory space is broader than regulation or governance, but it is unclear whether it conveys the role of the experts or the role of the elected officials. It probably holds both, but the point is that the ways in which they appoint each other or themselves as regulators have profound consequences on their motivation. Bloomberg recently wrote about the secret tapes of conversations within Goldman Sachs, which reportedly show that the Fed regulators either “downplayed or ignored” revealing or alarming statements of Goldman people, such as “once clients are wealthy enough certain consumer laws don’t apply to them” (Michael Lewis, September 26, 2014). This insight about the motivation of regulators does not square well with the contention that regulators correct the unrepresentative aspect of incumbents’ decisions. But, this is exactly the point. Vibert does not argue that, on the whole, regulation is better;  instead, he very carefully illustrates the conditions under which it is. And, thus it profoundly improves the discourse on regulation.

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