It seems such a benign term that it hardly warrants attention. Or does it?
The term was used over 1,300 times in New Zealand newspapers since the year 2000. Among the more expressive uses are the following headlines:
- “Commission slams regulatory system” (Waikato Times, 14 March 2014)
- “Report a damning indictment of regulatory system” (Dominion Post, 12 March 2012)
- “Offputting rules: Regulatory system deters foreign investors” (National Business Review, 23 May 2008).
In that same period, the term was used over 13,000 times in newspapers in Australia, Canada and the USA. The most notable ones include Barack Obama’s contribution to the New York Times titled “Toward a 21st-Century Regulatory System” (18 January 2011) and the almost poetic Edmonton Journal headline “Jet-setting celebrities trying to hijack regulatory system, resources minister says” (9 January 2012).
These newspaper headlines indicate that the term comes with many interpretations and meanings. The first refers to the 2014 Productivity Commission’s review of the regulatory system of New Zealand as a whole. The second aims to sum up the findings that the Royal Commission on the Pike River Coal Mine Tragedy presented in its 2012 report. The third refers to the various regulators and regulations that international investors face when doing business in New Zealand.
Thinking in regulatory systems: Different scales, different topics, different elements
Given the frequent use of the term in the daily news, it appears that thinking in and of regulatory systems comes naturally to people. However, what people—and the organisations they represent—mean exactly with the term regulatory system is often unclear. The first three headlines cited show different levels of scale, and so do the final two. Barack Obama discusses legislative changes that affect the development, implementation and assessing of regulation in the United States as a whole (macro-scale). The Edmonton Journal refers to resource development, and particularly a large oil pipeline that would connect the Alberta oilsands with the west coast of Canada (micro-scale).
Not only do we see differences in scale when people discuss regulatory systems. Often, they conceptualise regulatory systems differently as well. For example, for the Productivity Commission, “New Zealand’s regulatory system includes the institutions, principles through which regulations are made, implemented, enforced and reviewed”. In other words, in this interpretation, there is one regulatory system that applies to New Zealand as a whole, brings together all activities related to regulation, and includes the principles that apply to these activities.
Others, however, have a different understanding. For the New Zealand Treasury, a “regulatory system is a set of rules, norms and sanctions, supported by the actions and practices of designated agencies, to shape people’s behaviour in pursuit of a broad policy goal or outcome”. Thus, there is a possibility of multiple regulatory systems that aim to shape behaviour, and are bound by the jurisdictions of agencies.
Indeed, many regulatory agencies and entities in New Zealand consider their regulatory systems bound by a broad but finite policy area or topic. For example, MBIE considers itself a “steward of 17 regulatory systems”, including the “consumer and commercial regulatory system” which “regulates the interactions that businesses and consumers have before, during, and after the point of sale of a good or service”.
Sometimes, however, regulators put much narrower boundaries around their regulatory systems, and limit them to very specific regulatory functions. The Department of Internal Affairs’ “private security personnel and investigators regulatory system”, for example, is a “licensing and enforcement system for employers and employees” in the private security and investigation industry and requires “certain license holders to undergo specified training”. It “ensures that security personnel are of good character and properly trained”.
What thinking in regulatory systems has in common: systematic reductionism
Despite these different conceptualisations of regulatory systems across the New Zealand government and elsewhere, many conceptualisations have one thing in common. Regulatory systems are envisaged as a set of parts (people, rules, processes, resources, etc.) that seek to influence a finite area or topic (New Zealand as a whole, business transactions, private security personnel, etc.).
We can sum up this view of regulatory systems as ‘systematic’ and ‘reductionist’: governments tend to unpack systems in their constituent parts to manage them. By understanding and managing the parts, governments seek to create order and a certain level of predictability of the whole. Likewise, to optimise the whole, it is expected that all parts can be individually optimised, for example by highly specialised staff for each part. 
Indeed, in New Zealand and elsewhere, we see various approaches to optimise all aspects of regulatory systems. Risk governance and risk-based regulation to better allocate scarce regulatory resources. The use of insights from the behavioural sciences to help people make better regulatory choices. The use of enforcement pyramids to achieve better compliance outcomes. And so on.
To put it bluntly, the systematic reductionist view of regulatory systems seeks to understand the parts to understand the whole, and then optimise the parts to optimise the whole.
Another way of thinking in regulatory systems: systemic holism
There are, however, other ways of systems thinking that could be (more) helpful to improve regulatory governance (the development, delivery, and reform of regulation). One would be a systemic and holistic understanding of regulatory systems.
A systemic view embraces the idea that a system is a set of interconnected parts that, over time, produces a unique pattern of behaviour. It embraces the idea that the performance of the whole is not reducible to the performance of the individual parts. Furthermore, it embraces the idea that the performance of the parts, and their optimisation, may result in an overall behaviour of the whole that is undesirable.
Since the mid-20th Century, this systemic and holistic approach to thinking of and in systems has slowly replaced the systematic and reductionist approach in a range of scientific disciplines. It questions traditional assumptions of order and stability of systems, of predictability of the outcomes of systems, and of the manageability of the behaviour of systems. It is particularly interested in the dynamics and complexity of systems as a whole, and the extent to which people can understand and perhaps, albeit always within limits, influence these dynamics and this complexity.
This systemic and holistic view of systems may help us to deepen our understanding of regulatory systems and may help us to understand better why well-intended systematic and reductionist optimisations of regulatory systems often do not achieve their desired results at the systems level.
To put it bluntly, the systemic holistic view of regulatory systems seeks to understand the how the behaviour of the system emerges from its parts and their interactions, often in ways that could not be foreseen ex ante. (We will come to see in later blog posts in this series, for example, that the systemic holistic view is particularly important to explore and understand regulatory failure.)
The Chair’s review of systems thinking and regulatory governance
Because systems thinking holds great promise for improving regulatory governance, the Chair in Regulatory Practice was (t)asked to carry out a review of the academic literature on systems thinking as it relates to regulatory practice and governance. Between July and December 2019, I have reviewed over 600 academic journal articles and some 30 books on these topics.
Over the next two months, I will write up the key findings from this review following the five E’s (evolution, examples, evidence, epistemic challenges, ethical challenges) that I use in the review on behavioural sciences and regulatory governance and the review of risk governance and risk-based regulation. While preparing the review report on systems thinking and regulatory governance, I will regularly blog on the topic.
My apologies for not getting this systems review done Christmas, as was my intention. Systems thinking and its many applications for regulatory governance is a fascinating topic, I have come to learn, but also a very broad one.
Stay tuned over the next weeks – or come back after the holiday season to read (and hopefully, learn) more about it.
 New Zealand Productivity Commission. (2014). Regulatory institutions and practices. Wellington: The New Zealand Productivity Commission, p.2.
 New Zealand Treasury. (2017). Building effective regulatory institutions and practices. Wellington: New Zealand Treasury, p.5.
 MBIE. (2017). Regulatory charter: Consumer and commercial regulatory system. Wellington: Ministry of Business, Innovation & Employment, p.3.
 NZ Department of Internal Affairs. (2018). Regulatory system information: Private security personnel and investigators. Wellington: Department of Internal Affairs, 1.
 Geyer, R., & Rihani, S. (2010). Complexity and public policy: A new approach to tenty-first century politics, policy and society. London: Routledge.
 Meadows, D. (2008). Thinking in systems: A primer. White River Junction, VT: Chelsea Green Publishing.