The Governance Paradox: Regulating Systems That Regulate Themselves

Managing systems that manage themselves is a challenging contradiction of governance. Complex systems—from economies to ecosystems—constant anticipation and adapt to changes in internal regularities, external conditions, and the behaviour of actors. An emergent capacity to regulate may develop, but it is usually attributed to interactions among heterogeneous actors interconnected by diverse channels of exchange. However, political–economic theory warns of the dangers of self-regulation: institutional capture by the regulated and inequality in the power to set and influence regulation outcomes. Horizontal accountability—mechanisms that hold authorities accountable to those subject to their authority—diminishes such risks. Transparency is the foundation of horizontal accountability. Independent external oversight is a second accountability mechanism that can help check the self-interest of regulators.