 "Tight regulation vs discretion: Economic Survey pitches for transparency")
Incomplete contracts and regulations in a world of uncertainty cause overregulation. Laying bare the pitfalls of regulations and discretion, the Economic Survey 2020-21 says it costs too much to foresee and describe appropriately the contractual outcomes for all (or even most) of the conceivable states of the world.
“Thus, the reality of incomplete contracts leads to inevitability of incomplete regulation. This makes some discretion unavoidable,” it said. In a complex and uncertain world, the actual outcomes or situations do not fit into neat boxes assumed in the regulation. Hence, the supervisor has to exercise some judgement. There is widespread belief that
