Performance-Based Regulation: Prospects and Limitations in Health, Safety, and Environmental Regulation

Regulation is designed to improve the performance of individual andorganizational behavior in ways that reduce social harms, whether by improving industry’s environmental performance, increasing the safety of transportation systems, or reducing workplace risk. Regulators can direct those they govern to improve their performance in at least two basic ways. They can prescribe exactly what actions regulated entities must take to improve their performance. Or they can incorporate the regulation’s goal into the language of the rule, specifying the desired level of performance and allowing the targets of regulation to decide how to achieve that level. This second approach is the subject of this article, which summarizes the discussion at a workshop organized last year by the Regulatory Policy Program at Harvard University. The workshop brought together decisionmakers from a dozen different government agencies as well as leading researchers from the fields of economics, engineering, law, and political science. The dialogue at the workshop, as summarized in this article, builds on the experiences of different regulatory agencies that have used performance-based regulation and clarifies its advantages and disadvantages in addressing health, safety, and environmental problems.