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.^[15] 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."^[16] 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.^[17] 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."^[18] 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.^[19]

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.^[20]

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."^[21] 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.^[22] The tendency of private organizations to develop "internally nondemocratic and bureaucratic structures" is "generally accepted as fact by social scientists."^[23] 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.^[24]

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.^[25] 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.^[26] 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."^[27]

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."^[28]