The UK Financial Conduct Authority recently published an occasional paper on "Economics for Effective Regulation" (EFER).

EFER is a new market-based methodology for regulatory economic analysis that will be employed to support the FCA’s efforts in ensuring that markets work well for consumers. EFER is intended to complement the FCA's traditional approaches of Impact Analysis and Cost Benefit Analysis by offering a more in-depth diagnosis of the issues that cause poor market outcomes. The EFER approach produces a combined assessment of the main problems impeding markets from becoming efficient – information asymmetries, market power, externalities, behavioural distortions, and unintended consequences of past regulatory interventions (regulatory failure) – and offers a process for diagnosing these problems, designing intervention, and assessing the impact of such intervention.  The FCA is currently trialing this new methodology in a study on general insurance add-on products.

The occasional paper is available here, and an accompanying article here.