The Regulatory Challenge.

• Author: Windsor, Duane

Beginning in 1979, the British government undertook a wide-ranging privatization of public corporations. By 1991, Exchequer net receipts on privatization sales exceeded [pounds]20 billion [p. 411]. Competitive markets were not typically introduced. While under the earlier nationalization system, there was a reasonably systematic regulatory process of judicial scrutiny, dispute adjudication, and ministerial accountability, there was in place no coherent government policy or system for regulation of the newly privatized industries [p. 411]. A new regulatory process has perforce had to be created after the fact of privatization, which occurred without much thought for subsequent problems of regulatory supervision.

This book comprises 18 essays, by mostly British economic and management specialists, concerning the introduction over the last decade of government regulation of both privatized industries and always private financial services. In general, the conclusions of the various studies sustain regulatory theory, but with a very strong emphasis on the need for heterogeneity in regulation varying with the particular circumstances of market failure and public policy goals.

The book is well planned, so that it covers a wide scope of industries other than basic privatized industries (coal, shipbuilding, steel): all the public utilities (with the notable exceptions of airports and water) and many services (national health service, express bus, higher education, broadcasting, telecommunications, legal, broadcasting). The book also includes essays on policy issues such as product-quality regulation, cost of capital, yardstick regulation, regulatory standards setting, European Community harmonization, and price-cap regulation. The substantive essays generally cover the UK history of the subject matter and crisply delineate and investigate the relevant issues and arguments. Useful empirical studies of market structure, conduct and performance are often included.

The introductory chapter by the editors states the four key conclusions of the volume. (1) While privatization on the whole benefited consumers and national economic health, privatization was often poorly structured, resulting in a host of subsequent regulatory difficulties. Either national or local monopolies, with strong incumbent advantages, resulted. Consumers have probably not benefited as well as they ought to from privatization. (2) Inappropriate industry structure and therefore...