52 Regulation

Introduction This chapter explores some of the main issues related to the regulation of the cultural sector, with specific reference to heritage. As the range of activities in the cultural field raises so many different economic questions, not all of them can be dealt with in the space available. Therefore the analysis is restricted mainly to issues connected with built heritage. So far, the topic has not received much attention in the literature:1 this chapter therefore surveys some of the main issues (what should be regulated, why, how, who should regulate?) and points out the policy implications arising from the analysis. Government is assumed to provide efficient remedies for market failure in the cultural sector; however, different mixes of government policy instruments – public expenditure, taxation and regulation – can be adopted according to prevailing economic and institutional settings. Here the focus is on regulation2 and on the policy implications stemming from its implementation: as Throsby (1997, p.19) has pointed out, ‘regulation, in the sense of specific constraints or directives affecting behaviour, is possibly the most widely used tool in heritage conservation, despite the fact that in most circumstances it is the instrument least favoured by economists’. The ‘public interest’ theory of regulation based on the welfare economics approach to market failure has been criticized because of its normative content, and attention has turned to a closer consideration of collective decision-making processes. It is assumed that regulators do not necessarily aim at pursuing public interest and that regulated producers are not ‘passive adjusters’, their relationship being depicted by the well-known ‘principal–agent’ paradigm.3 In what follows, the ways in which policy may depart from an efficient outcome in the heritage field are sketched, bearing in mind that lack of information, which represents one of the main justifications for intervention in the heritage sector, leaves more room for discretionary behaviour on the part of the regulator than in other fields,4 and this results in the heritage sector being particularly plagued by the abovementioned problems.