Decisional Costs

One way to compare standards-setting systems is by the cost of the enterprise, what economists call the "transaction costs." Standards-setting takes time and money, and some systems are likely to run more smoothly and inexpensively than others. Of course, transaction costs say nothing about substance. Perhaps more expensive standards are better in other respects. Given the troubling uncertainties about the costs and benefits of safety regulation, however, it is often impossible to evaluate standards substantively. If having a standard, any standard, is preferable to not having one, then the system that produces standards most quickly and inexpensively should generally be favored. But the difference between public and private decisional costs, as explained below, is more complicated than is often imagined.

Government rulemaking is often criticized for being time-consuming and expensive. Government agencies can be notoriously slow. It took the CPSC two years to decide whether to grant the Banner petition and another three years to develop a relatively simple woodstove labeling rule. The gas space heater proceeding was no quicker. OSHA's grain elevator standard was almost ten years in the making. Only the FAA stands in notable exception, having adopted the aviation fire safety standard in less than a year—a dubious distinction, considering its content.

But the case studies also demonstrate that government has no monopoly on slowness. NFPA proceedings can drag on for years. "Decisionmaking by town meeting" is how one committee member describes the process. It took NFPA much longer than the FAA to revise its standard for aircraft fire extinguishers. The same problem apparently plagues ASTM, ASME, and similar organizations. And there is reason to think that they will become slower in the future. As measured by the number of appeals to the NFPA Standards Council and the ANSI Board of Standards Review, contentiousness is on the rise. Moreover, standards-setting is expensive, and groups such as NFPA do not always see a sufficient return on the cost (in staff time alone) of meeting frequently to revise them. Again, there is an important distinction between standards developed in conjunction with product certification and most

other private standards. Testing labs have a business interest in assuring that product standards are readily available when new products are submitted for approval. Standards developed for certification purposes are written in very short order, often in a matter of weeks or months. The resulting "desk standards" at UL have been criticized as violative of due process, but they are to be credited with remarkable timeliness. When private standards-setters lack this economic incentive, or when the cost of developing standards gets too high relative to the income generated by product testing, their efforts are likely to be as slow as those of government.^[2]

It is impossible to compare the total administrative cost of the two systems, because so many of the costs on the private side are decentralized. Practically everyone on the NFPA and AGA/ANSI committees is sponsored by his or her employer or trade association. Undoubtedly, the total of these costs is still lower on the private side because the total number of person-days involved in any single standard is so much less.^[3] UL keeps close track of the costs and revenues associated with its standards, but the organization is unwilling to reveal these figures. However, private standards written for certification purposes are apparently cheaper than government standards, at least from the point of view of the standards-setting organization.^[4] In short, the private sector appears to have the advantage in terms of money and, to a lesser degree, time—particularly in connection with product testing.

The verdict on adversariness is less clear. Although private standards-setting is often considered less adversarial than government regulation, the case studies suggest that adversariness may be more issue-dependent than sector-dependent. In the woodstove and aviation safety cases, there was no more adversariness on the government side than there was on the private. In the grain elevator and space heater cases, the antagonism that marked the government proceedings was also present in the private sector—it was just less open and publicized. There were strong disagreements within AGA about the space heater. Even stronger disagreements lurk behind NFPA 61B; the National Grain and Feed Association opposes practically everything about it. The observed tranquility in the grain elevator proceedings came at the expense of not addressing the most important safety issue: housekeeping. The private sector has one important advantage, however. The scope of private standards is so broad that there is no stigma attached to particular standards-setting activities. When the CPSC recently took an interest in metal chimneys, the industry felt it had been unfairly singled out. No-

body has ever felt that way about a UL standard. This is not to say that the private sector does not "miss" some issues. It does. Certain types of issues seem to fall through the cracks in private standards-setting, some warranting government attention. This is one of the ways (discussed in chapter 12) in which government standards-setting could profitably complement its private counterpart.