Forestalling Government Regulation

Private regulatory behavior that does not follow the path of least resistance is often explained as an effort to forestall government regulation. This theory allows for stricter results without attributing altruistic motives to the private sector. The theory both overexplains and underexplains private regulatory behavior. It overexplains to the extent that virtually any outcome, lenient or strict, can be attributed to the threat of government regulation. As David Garvin states:

Only if firms were able to identify both the standards that would be established under government regulation and the precise amount that voluntary standards could fall below this level without inducing government action would [the lowest possible level] automatically follow. This information is seldom available. As a result, risk-averse firms, anxious to deter government regulation, might unknowingly set standards as rigorous—or, conceivably, even more stringent than—those that the government would demand.^[12]

Accordingly, the theory is not predictive either. Almost any outcome might result from the desire to forestall government regulation. The "forestalling theory" also underexplains private regulatory behavior, since private standards generally predate and significantly outnumber government regulations. The threat of CPSC regulation, for example, cannot possibly be relevant to more than a small number of UL standards.

Even if the forestalling theory does not have wide application, it is most likely to apply to paired cases. Although private standards usually predate public ones—as they did in all four of the case studies—it seems likely that the private sector might upgrade its standards in response to the threat of government regulation. At first glance, the private participants seemed to be motivated by the possibility of government influence. UL changed its labeling requirements in response to the CPSC. The same motive helped move AGA Labs to upgrade Z21.11.2. Even the NFPA Agricultural Dusts committee upgraded 61B in a few respects with the hope of forestalling OSHA. But these motivations were not particularly strong. Although UL changed its labeling provisions, the bulk of the standard has nothing to do with labeling or the threat of CPSC regulation. Committee members considering revisions to NFPA

61B seemed resigned to government regulation and certainly were not willing to enact serious grain-dust controls in order to prevent it.

Forestalling government regulation was a dominant influence in only one case: gas space heaters. The AGA/ANSI standard was upgraded in several significant ways while government contemplated regulatory action. But, as with NFPA and grain elevators, the private sector was unwilling to mandate what the government obviously wanted: an ODS requirement. It added that only after the CPSC did. This is not to say that forestalling government regulation is always a weak motive. The case studies suggest that this motive is largely subordinate to other factors, such as the demand for private standards. That demand and the broader political economy of private regulation suggest that product testing labs have different motivations than other private standards-setters. Product testing labs have a financial interest in eliminating competing government regulation, before or after the fact. That is why AGA/ANSI adopted the CPSC's ODS requirement and why UL was willing to alter its labeling requirements. Other standards-setters seldom have this strong an interest. The political economy of product testing is discussed below, followed by consideration of the peculiar politics of NFPA and the special problem of aviation safety.