In Figure 2, this is illustrated by mitigating the strict division between contract and regulation, while shifting the borders anti-clockwise and changing the angle.

Figure 2 puts three pair of opposite concepts in perspective: public-private; governance-management; regulations-contracts. It illustrates a view on overlapping and on-going mixing of concepts as well as a shifting emphasis (2aA2b). The straightforward dogmatic differences between public and private, governance and management, regulations and contracts are fading, although different stages of development can be detected. Governance enters the private domain, whereas management enters the public domain; this is illustrated by the changed position of the balloon 'governance'. Contracts are gaining ground compared to formal regulations. This trend is illustrated by a rotation of the fading border between regulations-contracts, whereas the borderline is curving. In governance, respectively in the public domain increased use of contractual forms and relationships is desirable. The total volume of rules (to be found in regulations and contracts) is multiplying (figure 2 is not on an exact scale as the volume of the concepts is not measurable). The trend of increased volume and weight of contractual relationships, however, is evident. Legal provisions that do not take these sorts of developments into account, are doomed to fail.

Figure 2a and 2b.

4.3 Regulating and contracting

Usually, institutions do not react to developments through a fundamental change of their by-laws, even if they have the power to do so without government approval, is exceptional anyway. A change of the law is reason to adjust institutional regulations, hut only as far as legally necessary.
A pro-active policy on regulating is rare. Subsequently, most by-laws are based on status-quo, not on entrepreneurial governance. Entrepreneurial policy is mostly implemented through slightly 'bending' the rules. Many institutional regulations are rigid, complex, dense, out-of-time and even in conflict with the law: a patchwork that does not prevent or solve problems and conflicts, but that creates them.

Regulations in higher education and research breathe a public tradition. Their main characteristics are one-way traffic and top-down hierarchy. An open and democratic procedure to change this, takes time, patience and perseverance, whilst the outcome depends on many stakeholders, all having distinct interests. Fewer regulations are needed, but producing this result is not the first quality of lawyers. They are trained to create safety: obstacles rather than business opportunities. They have to learn both. For example, mission statements in by-laws are pretty symbols, but, once defined, as difficult to change as national legislation. Because of procedural as well as substantial rigidities, they are easily counterproductive and should not appear in any regulation. A broad definition of the task of higher education institutions in a framework law suffices.
Regulations should not have the ambition of replacing governance, and managers do not make legislation superfluous.
Making contracts is the principal juridical instrument of companies and individuals in the private sector. The main characteristic is mutuality. Contracts are agreements between equal partners, being or representing legal persons, who agree on a voluntary basis. The term 'legal person' indicates that the juridical theories are firmly rooted in an individualistic approach. Changing a contract, usually only requires negotiating a new one, which is always possible in win-win-situations. Forms are relatively free; the contents almost unlimited.

The borders between regulating and contracting did not fade when the liberal tradition prevailing until the mid 19th century of the non-interventionist State was gradually replaced by actively interventionist governments that pursued social goals. The administration developed its own paradigms based on precise bureaucratic procedures. In education, social fundamental rights caused a visible presence of the State. After hesitating, it look the lead in promoting mass higher education. In the 1960s developments accelerated. Universities exploded under the post-war birth-rates and policies of open access, had to democratise, and, after 1980, to adapt to an unstoppable series of budget cuts. These and other developments led to the introduction of instruments of private law. For example: the 'policy agreements' (beleidsafspraken) between the Netherlands government and each institution in 1983, were the main legal instrument to implement the major budget cuts that forced universities to close or merge departments. This legal instrument was chosen by the government to ensure the implementation of its policy.
The same type of juridical development, but earlier, took place in other merit-good sectors like postal services, energy and water supply, transport, and health care. lt is notable that the predominant legal status in these sectors were not always the same and that nowadays monopolies, for example in telecom, are being abolished. Whilst the State and supranational organisations increasingly use contracts, jurisprudence and jurisdiction developed theories, which made the State a legal subject that acts on equal footing with its citizens: they became equal contracting partners. While the State voluntarily leaves its public domain being attracted by more adaptable legal instruments, it is inevitable that judges apply adagia like pacta sunt servanda and the rapidly developing criteria of bona fides between equal parties in the realm of public law. The privileged position of the State became mitigated. This is a positive development: the State Attorney does not win the case anymore by stating that the general public interest requires a breach of contract or other illegitimate action.
The trend towards a contractual approach is not equally visible in all countries. In Germany and central and eastern Europe, the tradition to regulate is very strong. This is not only due to the communist era that practically eradicated contractual thinking, or the federal structure of Germany. Countries like the Netherlands, New Zealand, Finland and Estonia, pursue an explicit policy of steering through 'dialogue' and must, subsequently, negotiate and purchase university products. This has to be distinguished from 'contractualism' in France, where governance is firmly rooted in a tradition of centralism.
Jacobs (1992) treats the cultural differences between the public and private sector. She distinguishes two types of strategies for survival: 'taking' that she considers typical for the State, and 'trading' that is typical for the market. Autonomous higher education institutions are clearly becoming entities that are steered through dialogue, interactions and relations. They are traditionally, more than elsewhere, managed by equals. The typology is naturally give and take, or in other words: a market-like 'trading'. One reason that institutional governance must be regulated is to ensure that no party is excluded from representation at the marketplace.