Protective Regulation and the Impasse Between the Public and Private Sectors
The rise and fall of government regulation challenges both sides in the debate over the proper role of government and business in protecting people against various risks. Leaving business to its own devices is suspect for reasons suggested by horror stories such as the exploding Ford Pinto. The "failures" of the free market are well recognized. Consumers frequently lack information. Businesses often lack the incentive to internalize "external costs" such as pollution. The costs of organizing collective interests can be prohibitive; and without the watchful eye of regulatory inspectors, the unscrupulous lack a powerful reason for self-restraint. But, as the revolt against regulation reveals, government regulation has its own serious shortcomings. As Charles Wolf points out, the "failures" of nonmarket arrangements parallel those of the free market. Many regulatory agencies are plagued by adversariness and delay. Regulations are often slow in coming but quick to court. These regulations can be inflexible and unreasonable. As a result, the political debate over protective regulation has reached an impasse. Proponents of government regulation appeal to well-founded fears of laissez-faire arrangements, while supporters of the private sector appeal to similarly substantiated concerns about regulatory bureaucracy.
In the heyday of protective government regulation, the late 1960s and early 1970s, nearly two dozen new federal agencies were created, including the Occupational Safety and Health Administration (OSHA), the Consumer Product Safety Commission (CPSC), and the Environ-
mental Protection Agency (EPA). These agencies were born of an "entrepreneurial politics" that, according to James Q. Wilson, capitalized on general antibusiness sentiment and specific "horror stories" from the private sector. Unlike the traditional "captured" agencies, which exist largely for the benefit of the regulated, these new agencies, according to Wilson, generally choose "stricter and more costly standards over more lenient, less expensive ones."
But as their performance fell short of expectations, these agencies fell from grace. OSHA damaged its reputation by adopting wholesale and enforcing almost indiscriminately scores of private standards for everything from toilet seats to stepladders. The CPSC looked similarly foolish devoting substantial resources to regulating matchbook covers and swimming pool slides. Several studies have since documented the economic burden of other government regulations that became excessive. Government regulation has also proven to be time-consuming and adversary in nature. Most CPSC and OSHA rules end up in court; few survive the challenge.
Enthusiasm for protective regulation waned further in the wake of "deregulation." The original targets of this movement were independent regulatory commissions engaged in economic regulation (for example, regulation of prices or terms of entry) where there are powerful arguments against stifling competition in the name of the public interest. Promising to "get government off our backs," President Reagan advocated several controversial proposals to leave protective regulation to the private sector. But the "policy consensus" that facilitated deregulation in interstate trucking and airlines is lacking in the fields of environment, health, and safety regulation. By some measures, there is continuing popular support for certain types of social regulation. By historical account, however, this support vacillates. There have been three waves of government regulation this century, and a fourth may be in the making.
The options for the future are often described in stark terms, favoring either government or business. As Wilson describes the political prospects, "One [option], favored by liberals, is new constitutional or legislative devices that will allow the government to be both active and uncaptured…. The second, favored by conservatives, is to have the government do less, thus leaving a greater variety of decisions to the market and to private lawsuits." These alternatives reflect a rigid conception of the public and private sectors. The public sector is cast as hierarchical and political, the private sector as decentralized and mar-
ket-based. But this conception does not do justice to the range of institutional arrangements available for protective regulation. Rather, it obscures important similarities between public and private institutions, leaving no room for one of the most intriguing but misunderstood alternatives to government regulation: private standards.
This failure of political imagination has been observed elsewhere. In the context of social services, Lester Salamon notes that "the prevailing conception of the welfare state has left little room for a vibrant nonprofit sector or for a blossoming government-nonprofit partnership." The underlying reasons are ideological. Conservatives tend to exaggerate the threat of government power; liberals minimize the accomplishments of the private sector. Yet, as Salamon demonstrates, nonprofit organizations play a much more important role in providing social services than is normally acknowledged.
The same is true in protective regulation. The prevailing conception of the regulatory state ignores significant activities in the private sector. Private standards are not even considered in many discussions of protective regulation. And when they are mentioned, ideology often clouds reality. Private standards have been promoted in the name of deregulation, even though they are obviously a form of regulation. But this position is based on ideology rather than on any specific understanding of how these obscure standards actually work.
The Vast Unknown World of Private Standards
Gas stoves, extension cords, x-ray equipment, and automobiles are among the thousands of items regulated in the United States by industrywide safety standards. Yet remarkably little is known about the institutions that generate the overwhelming majority of standards. These institutions, many will be surprised to learn, are private, not public. In the list above, only automobiles are subject to safety standards written by the public sector—and even so, private standards developed by the Society of Automotive Engineers play an integral part in the government's regulatory scheme. In significant product categories, such as gas and electric appliances, virtually all existing safety standards are developed by the private sector.
The National Bureau of Standards (NBS), recently renamed the National Institute of Standards and Technology, estimated that there were thirty-two thousand private standards in 1983. The bulk of these regulate uniformity or interchangeability and are not particularly important or controversial. The number infused with significant implications
for the public interest is probably in the thousands. These standards aim to promote social goods such as fire safety and product safety. Many are written by traditional trade associations—membership organizations with relatively homogeneous memberships. Others are written by little-known groups such as Underwriters Laboratories (UL) and the American Conference of Government Industrial Hygienists (ACGIH; a prominent private organization, despite its name). At least half of the top twenty standards-setters in the private sector are organized along professional lines or as "independent" entities (see table 1). More detailed background information about these private standards-setters appears in chapter 2.
Private standards raise many significant policy questions for government. First, public agencies must decide when (if ever) to defer to these standards or incorporate them into law. The Office of Management and Budget (OMB) issued a circular in 1982 to encourage federal agencies to use private standards, but the policy is vague and has not been implemented effectively. Second, agencies must decide when and how to participate in private standards-setting. A controversial issue within the CPSC is whether government representatives should vote on private standards-setting committees. Third, government must consider how (if at all) it can improve private standards-setting. Finally, government must decide when (if ever) to ban private standards. The FTC and the courts have addressed this issue over the years in the context of antitrust law.
The literature on private standards-setting is long on anecdotes but short on systematic analysis and evidence. Public standards-setting, by contrast, has received far more scrutiny, even though the size of the undertaking pales in comparison to the private sector. The CPSC, for example, has adopted about a dozen product safety standards since 1973, several of which were struck down in court; UL, on the other hand, has over five hundred published safety standards currently in force. Yet there are books, dissertations, and countless articles about the CPSC. The only published works about UL, a few scattered articles, were written mostly by UL staff members. David Hemenway's Industrywide Voluntary Product Standards provides a helpful analysis of the various types of private standards, but it says little about the "quasi-political" process through which these standards are developed.
The Presumption Against Private Standards
Given their disputed, but potentially important, role in public policy, there is surprisingly little information about the actual performance of
private safety standards. Nevertheless, there is widespread belief that these standards are more lenient and are developed through procedures less formal and less solicitous of due process than those of government. Various conclusions might follow from this conventional wisdom. Informality might be favored over formality, as it increasingly is in the resolution of civil disputes. Leniency might also be favored, depending on whether government regulation is really as burdensome as often claimed. But those interpretations, however plausible, are rarely applied to private safety standards. Rather, suspicion of private regulation is so high that there is practically a prevailing presumption against using private standards for public purposes.
The Federal Trade Commission (FTC) was so concerned about private standards during the Carter administration that it proposed to regulate the entire enterprise. That effort was not ultimately successful, but neither was President Reagan's subsequent effort to increase public use of private standards. The OMB circular advising the use of voluntary standards "wherever possible" is ignored by agencies that harbor popular doubts about the desirability of private standards. Similarly, the CPSC, in the face of intense opposition, backed away from a proposal to "recognize" selected private standards. The presumption against private standards stems from (1) the voluntary nature of these standards and (2) the political pressures that are thought to control their development.
The "Voluntary" Nature of Private Standards
Private standards are initially suspect because they appear to be "voluntary" in nature; at least they are frequently described that way. This label suggests the kind of decentralization intrinsic in market arrangements. In Albert O. Hirschman's useful terminology, it suggests the importance of "exit." As an organizing force, exit can precipitate a distinct logic of institutional control. In the area of education, for example, Terry Moe and John Chubb argue that public schools, which respond more to politics (voice) than markets (exit), are "quite literally at a systematic disadvantage" compared to their private counterparts. Because parents can remove their children from private schools, they argue, the teachers and administrators are more responsive than in the public sector.
Applied to the area of private safety standards, "exit" suggests a serious problem. To extend the analogy with education, manufacturers and other business interests apparently take the place of interested par-
ents as the primary influence on program administrators. These participants, seemingly concerned more about self-interest than about the interest of others, might "exit" if they do not approve of the regulatory product. In other words, they might refuse to participate in the process and boycott any standard developed in their absence. This suggests a bias in favor of the largest firms, those whose "exit" would most damage the enterprise.
A related hypothesis is that private standards-setters simply seek the "lowest common denominator." This downward pressure is thought to stem from rules requiring private standards to reflect a "consensus" of the participants. This does not usually mean formal unanimity, but the reality of private organizations is that "the fear of disintegration is frequently the decisive factor in the framing of governing institutions." The implication is that the demands of organizational maintenance generally override the possibility that private standards will be more stringent than desired by nearly all the participants. As a result, George Eads and Peter Reuter have hypothesized, private standards-setters probably "water down" their safety standards to appease potential dissenters.
These hypotheses seem most appropriate for trade associations, but they do not appear to fit a legion of other private standards-setters. Scores of so-called voluntary standards are actually coercive. They exist by demand on the part of more than just the regulated. Many of these standards have the force of law. UL standards, for example, are frequently incorporated into law through municipal building codes. Powerful nonlegal forces also compel compliance with various "voluntary" standards. Gas utilities generally will not install or service a gas appliance unless it is certified as complying with the safety standards of the American Gas Association (AGA) Laboratories. Major retailers such as J. C. Penney incorporate private safety standards into their purchase orders, helping to explain a popular observation by those familiar with private standards: "It is impossible to market an electric appliance in this country that is not UL-listed." These various forces call into question whether "exit" dominates private standards-setting. They also limit the application of George S. Stigler's theory that regulation exists primarily to satisfy demands of the regulated.
Private Power and Public Safety
Recognizing that private standards cannot be dismissed as "voluntary" leads directly to larger concerns about the coercive use of private
power. As Grant McConnell argued in Private Power and American Democracy, it is "unreasonable to assert that private associations are both important to general policy and yet so unimportant that their political life may be ignored." McConnell described as "orthodoxy" an "unstable amalgam of very different ideas" favoring the exercise of private power in America. While that "orthodoxy" certainly favors the basic elements of a vibrant market economy—McConnell wrote about the modern corporation, agriculture, and labor—the argument does not carry over to private safety standards. There is tremendous skepticism about private regulation in this country.
First, the United States has a strong legal tradition that embodies a liberty-based concern for the protection of individual interests against the exercise of "police powers." The legitimacy afforded private action in the business world, where social arrangements are more consensual than coercive, simply does not extend to actions perceived as "regulatory." Concerns about the due process of private standards-setting are widespread. These concerns were fundamental to the FTC's effort to regulate private standards-setters. Lacking the constitutional order of public government, these groups appear particularly vulnerable to Robert Michels's "iron law of oligarchy"—the tendency of organizational leaders to acquire and promote interests different from those of their members. The tendency of private organizations to develop "internally nondemocratic and bureaucratic structures" is "generally accepted as fact by social scientists." Although the FTC did not adopt the process-based regulations, it retains legal jurisdiction, and its attorneys retain heightened interest, in pursuing complaints concerning private abuses of due process.
The second argument against private standards is more substantive. The political critique of pluralism suggests that when private groups dominate the policymaking process, the results are rarely (if ever) in the public interest. "The most entrenched, the best organized, and frequently the oldest" interests are likely to benefit most from the resulting policies. This criticism need not imply bad motives or exclusionary practices on the part of private standards-setters. Even organizations that encourage participation of various groups are unlikely to hear from some interests. The "logic of collective action" suggests that consumer and other diffuse interests will often be underrepresented, whatever the forum. These interests might be galvanized effectively (but temporarily) by a catastrophe, but in the long run the concentrated interests of the regulated are likely to prevail.
The argument is familiar in the public sector, where agencies are often thought to favor the interests of the regulated. Based on observations about the Interstate Commerce Commission, the Civil Aeronautics Board, and the Federal Communications Commission, for example, Grant McConnell argued in 1966 that "accommodation" with private interest groups tends to "eliminate public values from effective political consideration."
Theodore Lowi has argued more recently that the "parceling out" of public policymaking to private interests is "co-optive" and destructive of public values. Private safety standards appear to be the ultimate extension of this phenomenon. Lacking the presence of outside interests, private regulatory institutions seem nothing more than a variation of the fox guarding the chicken coop. Lowi makes specific reference to private standards in the second edition of The End of Liberalism, condemning these arrangements as "prime examples of the continuation and reinforcement of 1960s liberalism applied to public policy."
Beyond "Capture" Theory: Toward an Institutional Perspective
But private regulation, like public regulation, varies in so many respects, internal and external, that no single theory fits all forms. Just as capture theory has limited application in the public sector, particularly in the area of protective regulation, there is reason to question its universal application in the private sector. The politics of private regulation appear to be far more complex than capture theory admits. The mixture of motives and interest groups in the private sector is wide-ranging and unpredictable. Internal factors, such as administrative procedures and organizational self-interest, further complicate the picture. Each suggests reasons why capture theory apparently fails to chart the most important differences between public and private standards-setters.
Who Benefits from Private Safety Standards?
Private standards-setters are widely assumed to be "captured" by business interests. Suggesting otherwise would, under this view, be as naive as indulging the notion that public agencies simply carry out their statutory charge to act "in the public interest." But developments in the public sector suggest that capture theory does not fit protective regulation nearly as well as it fits economic regulation. The classic state-
ments of capture theory—Samuel P. Huntington's "administrative marasmus," Marver Bernstein's "life-cycle theory," and Stigler's "theory of economic regulation"—stem from agencies that regulated prices or terms of entry. There is little justification for such regulation, the kind long performed by the Interstate Commerce Commission ("the most studied of all agencies" when McConnell and Lowi wrote about government regulation). But protective regulation is different. It is economically defensible in various (arguably frequent) instances of market failure. And, at least in the public sector, protective regulation does not come about through the demands of business. More often it is adopted over their objections. "Only by the most extraordinary theoretical contortions," Wilson concluded, can this regulation be explained "by reference to the economic stakes involved."
Protective regulation in the private sector is similarly complex. Business interests are neither unitary nor necessarily opposed to the public interest. Some forms of private standards-setting, typically those sponsored by trade associations, are controlled entirely by the regulated. Others are more independent, offering services such as "third-party certification." The mission of these organizations resembles those of the public agencies charged with protecting health and safety. Their status is unclear, however, and this lack of clarity has given rise to several disagreements about motives. UL lost a legal battle with the Internal Revenue Service in 1943 when a federal court decided that "testing for public safety" is a business, not a charitable undertaking. A private standard developed by the National Sanitation Foundation was upheld in a recent case partly because the court considered the organization to be "independent." How to characterize the American Society of Mechanical Engineers (ASME) was the source of strong disagreement in a recent Supreme Court case, with one side calling it a "scientific" group and the other side alleging it is "dominated by commercial interests."
To be sure, there is a rich tradition of using "self-regulation" to stifle competition. This includes standardization of sizes and shapes, practically a prerequisite to effective price-fixing. But safety standards are different. Granted there are some anticompetitive ones masquerading as safety standards, but there are also genuine safety standards that, although not necessarily as strict as what government would adopt, certainly benefit the diffuse interests of consumers.
These private standards-setters do not fit easily into the existing understanding of private organizations. In their landmark study of formal organizations, Peter Blau and W. Richard Scott classified organi-
zations "on the basis of the cui bono —who benefits." In his book Who Profits, Robert Leone suggests looking at regulation in a similar way. Either way, private standards-setters are far more complicated than generally appreciated. In Blau and Scott's terms, private standards-setters are likely to be considered "mutual-benefit associations," organized primarily for the benefit of membership. But that analysis fits the trade associations much better than the "independent" organizations. The membership of, say, the National Fire Protection Association is so large and diverse that the "mutual-benefit" theory clearly does not fit. The members are not the primary beneficiaries of most standards. And many organizations, such as Underwriters Labs, do not even have members.
These groups might be considered "service organizations" because they have clients. But that description is also inappropriate, because product testing and certification appear to be directed at third parties, including insurance companies, wholesale buyers, and individual consumers. This leaves the most nebulous category of all: the "commonweal" organization, whose prime beneficiary is the public at large. While this term undoubtedly describes some private standards-setters, it is not clear whether "commonweal" private standards are likely to be better or worse than the public alternatives.
Several political scientists have condemned private standards in any case. Lowi declared private safety standards guilty by association with the old National Recovery Administration (NRA). Calling these standards "indistinguishable" from the old NRA codes, Lowi marveled that "there is so little suspicion as to their constitutionality" under the nondelegation doctrine. Others have invoked the ghost of Herbert Hoover—the engineer turned secretary of commerce intent on a grandiose plan of economic "standardization"—to belittle private standards.
These arguments are not convincing. In contrast to Lowi's interpretation, Donald Brand has recently argued that "ideology and the institutional interests of the state played a more important role in determining the behavior of those administrators than special interest demands." Moreover, just as it would be inappropriate to judge the Environmental Protection Agency based on the performance of the Interstate Commerce Commission, it is inappropriate to judge private safety standards as if they were akin to the NRA's "codes of fair competition" (in other words, economic regulation).
Lowi's argument also misrepresents the role of the public and private sectors by suggesting that government is preeminent in protective reg-
ulation. By framing his argument in terms of "delegation," Lowi implies that these functions are somehow inherently public. This conception is not supported by history. The private sector was in the business of product safety decades before the Consumer Product Safety Commission was created in 1972. The American Gas Association Labs started regulating gas appliances in the 1930s, and Underwriters Laboratories was certifying electrical equipment before the turn of the century.
These arrangements are far more complicated than capture theory admits. Undoubtedly, some private standards-setters are mainly self-serving. But others probably promote the public interest to a significant degree. When OSHA adopted hundreds of private standards, the problem was not that they were private; it was that the agency acted indiscriminately. Some of those standards were essentially defunct, like old statutes never removed from the books. Others were more desirable. Unfortunately, OSHA did not distinguish between the two. In 1988, however, without any measurable opposition, OSHA adopted a more carefully selected group of private safety standards. Certainly the public benefits to some extent from these standards, although the magnitude of the benefit and its corresponding cost must be examined before reaching any broader conclusions.
Bringing the Bureaucracy Back In
A second major problem with existing theories of private standards-setting is that they do not account for organizational interests or administrative procedures. Agencies should not be "mistaken as passive tools yielding to the strongest pressure of the time." Organizations have their own interests, although these are often overlooked in theories that emphasize compromise among outside interests. Bringing the bureaucracy back into the consideration of private standards challenges the conventional wisdom in two ways. First, it demonstrates that private administrative law is similar in many ways to traditional administrative law. Second, it identifies several unexpected manifestations of organizational self-interest.
Private Administrative Procedure . The rules of administrative procedure, the stuff of administrative law, are recognized as an important influence on agency decisionmaking in the public sector. Although the content of administrative law is controversial, it is widely assumed that the tradition of constitutionalism it reflects sets the public sector apart
from the private. By affording certain due process protections, enforcing notions of interest representation, and holding agencies accountable through an appeals process, administrative law shapes and legitimatizes agency decisionmaking. Private forms of governance, by contrast, are more consensual, minimizing the rule of law and, according to Lowi, favoring large, well-organized groups.
But the private sector is not without administrative rules and legal norms. In fact, there is a surprising degree of similarity in procedural requirements in the public and private sectors. The precepts of due process are enshrined in the by-laws of most private standards-setting organizations. Simple notice and comment procedures are commonplace. And the opportunity to appeal exists in many organizations. The Board of Standards Review, for example, hears appeals concerning any of the thousands of standards sponsored by the American National Standards Institute (ANSI). Committee membership in several private organizations is subject to rules against "domination" by any single interest. Some private standards-setters encourage outside groups, including consumers, to participate in their proceedings. The extreme example, the American Society for Testing and Materials (ASTM), even pays such groups to participate in the development of certain standards—a practice that has been discontinued in the public sector.
This is not to say that various private organizations protect individual interests to the same extent as public organizations; only that they apparently do more than is generally recognized. Of course, more is not necessarily better when it comes to procedural "protections." As Ronald Braeutigam and Bruce Owen point out: "This jurisprudentially laudable set of constraints on agency behavior has an interesting side effect, which is the creation of substantial delays and legal expense." Such costs might be worthwhile. But, as Lawrence Bacow observes, divisive proceedings might hinder compliance. Overly formal proceedings might also limit "the rich set of informal contacts" that would otherwise enhance decisionmaking. Therefore, the private sector might even hold an advantage over the public if its administrative procedures strike a better balance between providing meaningful procedural protections and minimizing the undesirable side effects of due process.
Organizational Self-Interest . Conceiving of standards-setting solely in terms of the regulated also overlooks the recognized importance of organizational self-interest. Agencies do not just respond to exterior
pressures; they have interests of their own. Although there is no clearly articulated theory of organizational self-interest in the public sector, it is widely assumed that the interests of private regulators diverge significantly from the public interest. Much has been made of Michels's "iron law of oligarchy," the tendency of organizational leaders to acquire and promote interests different from those of their members. McConnell went so far as to argue that "the sweep of [Michels's] work extends by implication to all organizations in which membership could be said to exist." Michels's conclusions stem entirely from a 1913 study of political parties in Germany, however, and in all likelihood the operation of this "iron law" varies significantly with such variables as organizational purpose and structure, not to mention larger differences in political culture and history. Even if Michels's hypothesis is fitting, what ultimately matters is the nature of the interests pursued by the leadership of private standards-setters.
One of the few studies of private safety regulation, Michael Hunt's examination of the Association of Home Appliance Manufacturers, suggests that the leadership might pursue policies more enlightened than those favored by the membership. Hunt found that the AHAM staff had "a substantially different set of preferences from the member companies" and used it to achieve "stricter" results than would have been supported by the membership! Steven Kelman's comparison of public regulation of the workplace in the United States and Sweden is similarly suggestive. Kelman concludes that these two seemingly different regulatory regimes produce surprisingly similar outcomes. He attributes this largely to the influence of safety professionals. Wilson's study of public regulation concludes that the motives of various types of government employees help explain outcomes that cannot be explained by capture theory. Similar influences probably exist in the private sector. To the extent that they do, private standards are more desirable than generally recognized. In short, Michels could be right about the significance of organizational self-interest, but Lowi could nonetheless still be wrong about the undesirable nature of the resulting outcomes.
There are several other reasons aside from the influences of professionalism why private standards-setters might adopt standards much stricter than expected. One is the desire to forestall government action. This incentive might actually lead the private sector to adopt stricter standards than government would have done. Another possible reason is liability law. In the case of product safety standards, for example,
strict standards may minimize liability costs or reduce the cost of liability insurance.
This is not to say that private standards are generally better or worse than public ones. Insufficient information is available to reach a conclusion. There are reasons both to doubt and to believe the conventional wisdom about public and private regulation. What is needed is more detailed information about the similarities and differences between standards-setting in the public and private sectors.
Research Goals and General Findings
This study seeks to provide the basis for a better understanding of the relative merits of public and private standards-setting in the area of safety regulation. Given limited knowledge of private-sector efforts, however, the first goal is to determine how private organizations actually work. What Wilson said about studying public regulation is equally true of private: "There is a need to go beyond an account of the newsworthy scandal to an exposition of how [agencies] ordinarily operate." This inquiry is well suited to the case-study method. Two lines of analysis are suggested in the literature. The first concerns administrative law and procedures. Little is known about how private organizations actually achieve "consensus," respond to negative comments, or handle appeals. Proponents of private standards claim these procedures work well; critics charge they paper over fundamental flaws in private decisionmaking. An analysis of specific cases should shed some light on this dispute. The other obvious avenue for inquiry is political. Critics argue that the interests represented in private standards-setting are heavily biased in favor of business. This hypothesis is plausible, but, as indicated above, there are also reasons to doubt it. The case-study approach allows a detailed examination of the nature and balance of participating interests in a specific context.
The ultimate aim of this study is to evaluate the relative performance of public and private standards-setting. How well does each sector regulate safety? This study consists of four pairs of case studies. In each instance, both the public and private sectors have adopted safety standards in the same general area, and the study concentrates on organizational differences between the two sectors. The form of inquiry is decidedly institutional. Its main contribution is in identifying the comparative institutional advantages of the two systems.
Looking ahead to the analysis and conclusions, these case studies suggest that the difference between public and private standards-setting is not just a matter of degree, but one of kind. The analysis reveals important differences in how public and private standards-setters (1) estimate costs and benefits, (2) resolve philosophical questions about the appropriate scope of safety regulation, and (3) act over time and in the context of a larger regulatory program. Is the public or the private approach generally better? No simple answer to the question is possible, because the two sectors do not only favor different outcomes; they have different ways of looking at problems as well.
The analysis of outcomes partially confirms the conventional view that public standards are stricter than private ones and more prone to overzealousness. But there are contrary indications as well, suggesting that the private sector is more diverse than often presumed. Although the range of the interests represented on most private committees is limited by the absence of bona fide consumer representatives—an interest not necessarily better represented in public proceedings—the cases identify several important, but unappreciated, advocates of safety in the private sector. On occasion these forces combine to exhibit a surprising tendency toward strictness. Private standards should not, therefore, be rejected on the argument that they are intrinsically underprotective.
The differences between public and private approaches are not just in what should be done about a problem, but in whether anything should be done. Some "solutions" that are never seriously considered by one sector are routinely favored by the other. For example, public agencies are more willing than private ones to select early compliance deadlines, require use of unproven technologies, and regulate in a manner that interferes with traditional notions of managerial discretion. But these differences do not all cut along ideological lines. In surprising ways the private philosophy also encompasses public safety goals. Two institutional features appear to shape these regulatory philosophies: professional norms and the regulatory environment.
The significance of the former was suggested by Wilson, whose study of public regulation notes that professionals in different fields "often have distinctive ways of thinking about problems." This is particularly significant in comparing public and private standards-setters, because engineers dominate most private organizations, while lawyers play a leading role in the public sector.
The law is also a powerful external influence that constrains decisionmaking in the two sectors. Only private standards-setters are subject to the antitrust laws, and they frequently cite these laws as a reason for taking various actions. Liability law is seldom cited as an official reason for doing anything in the private sector, but the case studies suggest it is a more significant factor than antitrust law in explaining regulatory behavior. Liability concerns help explain why certain provisions are vague while others are relegated to an appendix. More generally, liability law seems to explain the reluctance of the private sector to address issues of consumer misuse or embrace certain new technologies. Public agencies, on the other hand, are subject to more frequent and intrusive judicial review of their regulatory decisions. These differences in regulatory environment help explain other differences in regulatory philosophy.
At least as important as these static differences is how the organizations change over time. Aaron Wildavsky has stressed the importance of "resilient" approaches to safety regulation. Others have emphasized the advantages of "flexibility" and "responsiveness." These concepts place standards-setting in an evolutionary context. What matters is not so much how individual cases are resolved, but how results change over time. Again, the case studies suggest important difference between the public and private sectors. Private standards-setting is prospective and ongoing, while public efforts tend to be corrective and singular. Private standards-setters tend to intervene relatively early in the life cycle of an issue, adjusting the subsequent standard over time. Public standards-setters, by contrast, are likely to get involved later in time, often after a major disaster, and to adopt a "one-shot" standard that is not subsequently revised.
Chapter 12 offers several suggestions on how to take advantage of these differences. One approach is for the public sector to stress "public" values. In other words, it should emphasize strategies shunned by the private sector. Second, government should identify niches where public standards are likely to complement private ones. A particularly promising strategy is filling "holes" in private standards. Finally, the importance of alternative policy instruments must not be overlooked. Standards-setting in both sectors is affected by a variety of "external" factors that are subject to influence by government action. Several of these alternative policy instruments hold the promise of improving standards-setting in ways that could never be mandated directly. For ex-
ample, altering product liability law and improving the education of engineers could both lead to significant improvements in standards-setting. Recognizing these subtle influences and pursuing strategies that build on the complex interaction of public and private safety standards is the key to an intelligent and productive standards policy.