The term "regulative fiction" is misleading. Those fluent in Nietzsche's writings might get it, but I don't think it's a good word for a general audience, as it suggests this has to do with government regulation. It doesn't.
It is meant to mean that the Ruling Caste has created a simplified story --- a mythology, we could say, a mythos -- which simplifies the unruly chaos of the real world into a more easily-grasped (and very untrue) vision of the world and teaches certain morals and virtues (claimed morals and virtues, anyway) based upon that mythology.
This mythos just coincidentally also happens to justify why they are the only ones Fit to Rule. All aspects of the mythos are designed to, or by happy accident, identify problems (or fictionalized, simplified versions of problems) which the Ruling Caste is uniquely able to solve, due to (here are sub-myths that support the overarching Ur-Myth) of their education, their good taste and judgment their (they never say this but it's obvious that they think it) breeding, etc.
For what it's worth, the phrase "regulative fiction" is borrowed from Nietzsche, or at least his translator. I think this desperate need to maintain the regulative fiction in Washington is the whole ballgame for understanding what is going on with the Trump administration. For a very long time before Trump, the "regulative fiction" was getting very, very discordant with reality.
He notes that the current project of the beltway priests maintaining belief in their increasingly-bizarre mythos is to paint Trump as a clown who shouldn't be supported, so that their religion has no loud, popular apostate challenging it.
Except they can't do that without asking voters to choose between Trump's behavior and Washington’s preferred narrative of how things are supposed to work, and Beltway types still haven’t grasped that voters decided long before Trump arrived on the political scene that most of what passes for standard operating procedure in D.C. is just as farcical.
... the public does not credit Pierre Delecto and the rest of the High Priests of the Pro-Government Mythology who are always screaming about Trump violating "norms," because they've known for a long, long time that those claiming to be custodians of our precious "norms" are violating those norms all the time, and often more egregiously than Trump does.