Incentive regulation in the United Kingdom and the United States: Some lessons

In view of the ubiquity of incentive regulation in the United Kingdom and its growing importance in the United States and elsewhere, it is appropriate to devote a special issue of the Journal of Regulatory Economics to this subject. Indeed, in the absence of practical developments in regulation, notably incentive regulation, the JRE itself would probably not exist. In this paper, we will provide context for the current developments in incentive regulation. We will explore the process of implementing incentive regulation, comparing the differences between the United States and the United Kingdom, and attempting to draw some lessons.(2) In so doing, we will briefly review the contribution of the papers in this issue. Section 1 will be, by way of background, concerned with some of the forces driving the adoption of incentive regulation. Section 2 will be concerned with alternative approaches and practical compromises made in the adoption of incentive regulation. Section 3 examines implications for the future direction of incentive regulation in the United States and the United Kingdom Section 4 provides a brief summary and conclusions. An example of a self-revealed regulatory mechanism is provided in the Appendix.