Niches for Public Standards

An interactive standards policy should also be based on identifying niches for public standards. This strategy targets issues or areas that

private standards do not cover. Some oppose this effort at interactive regulation, fearing that public standards will "drive out" private ones. That has happened several times on a programmatic level. The emergence of federal automobile safety standards displaced the safety program of the Society of Automotive Engineers. (The SAE still writes test methods that are referred to in government standards, however.) Similarly, the creation of the Civil Aeronautics Board ended UL's involvement in airplane certification. But the argument does not provide a valid reason for avoiding overlap in individual standards. Public and private standards-setters can and do operate in the same policy space. They sometimes even cooperate. UL works with the Food and Drug Administration in regulating microwave ovens and with the Coast Guard in regulating marine safety equipment. But even when the two sectors compete—attempting, as they did in all four case studies, to regulate the same subject independently—the efforts of one sector do not necessarily detract from those of the other. In none of the cases did the public standard "drive out" its private counterpart, although both UL and AGA Labs argued that they would. Identifying areas where public standards would best complement private ones is difficult because there are so many private standards. Nevertheless, the case studies suggest three possible niches.

Orphan Standards . One promising niche for public standards is similar to that of "orphan drugs"—efficacious drugs that private companies decline to produce.^[10] The most common examples of orphan drugs are treatments for rare diseases, where the number afflicted (the potential market) is too small to justify the expense of producing the drug. A similar condition obtains with safety standards: market forces limit the development of possibly useful private standards. The case studies suggest two types of market failure in the market for safety standards. First, as with orphan drugs, some standards are not written because the development costs are too high, given the anticipated income. There is such a limited market for, say, aviation fire extinguishers that the cost of developing special requirements for the aircraft environment are not worthwhile. Yet a standard of this type would probably do more to improve aviation fire safety than the specific actions taken by either the FAA or the NFPA. UL officials are quick to point out that some of its standards are "charitable." The standard for septic tanks, for example, apparently generates far less income than it costs. Yet there are undoubtedly other areas where standards would help

promote the public interest but do not currently exist for economic reasons. Second, there is a related type of market failure involving chronic hazards. The cost of developing standards to control truly longterm hazards is simply prohibitive. The private sector readily admits its failure to address such safety problems. Engineers at AGA Labs agree that the hazards of long-term exposure to combustants from space heaters should be studied, and possibly regulated, by the government. An enlightened government standards policy would seek to identify and address these gaps in private standards.

Comparative Standards and Information . Another possible niche for public action involves comparative standards and information. Economists argue that optimal levels of safety can be achieved when consumers select their own levels of risk.^[11] That only works, however, if comparative safety information is available. A wider range of choices will also be available to the public if graded standards are favored over "pass-fail" ones. An assistant attorney general in the Carter administration cautioned: "A single quality level standard if set too high may unjustifiably exclude substitute products from the marketplace. Pass-fail standards may also blunt the incentive for further product development and innovation."^[12]

Standards that facilitate safety comparisons are also desirable when information on causal links is weak. For example, there is significant uncertainty about the connection between high-absorbency tampons and toxic shock syndrome. Given this uncertainty, a standard that allows consumers to compare absorbency rates and apply their own notion of risk aversion seems preferable to one that imposes a single, arguably unjustifiable, level of risk.

Private action of this type is highly unlikely given the competitive implications of comparative safety standards. Private standards are built on common interests. Comparative standards are antithetical to these common interests. UL assiduously avoids rating safety. Instead it maintains the myth that products fall neatly into two categories, safe and unsafe. After extensive negotiations, the major tampon manufacturers were unable to agree on a test method for rating absorbency. Each method was considered favorable to a particular brand, raising the ire of various competitors.^[13] In sum, the private sector is generally unwilling to develop standards that distinguish levels of performance. To the extent that this strategy has a place in safety regulation, it is located in the public sector. Several comparative standards have been adopted by the federal

government in the automotive field: octane ratings, fuel economy ratings, crash ratings, and tire treadwear ratings. Not all these standards have been successful, but this type of effort is worth considering and probably has a place in any enlightened standards policy.

Integration and Coordination . Finally, there is a role for public standards to cut across private regulatory boundaries. The narrow focus of private standards-setting tends to eliminate safety judgments across products or programs. Neither AGA Labs nor UL, for example, considers the relative safety of gas appliances versus electric appliances. AGA concentrates on the former, UL on the latter. There is no equivalent to the OMB in private standards-setting, trying to ensure that the next regulatory efforts are undertaken where they will do the most good. The government could provide a valuable service in some areas by considering together the universe of products or processes regulated separately by the private sector. An overall policy of, say, banning certain propane appliances in favor of natural gas and electricity might create more benefits than individual standards aimed at making all three somewhat safer.

The case studies also include examples of assorted "holes" in private standards that could possibly be filled by public action. For years, NFPA 211, the installation code for chimneys, fireplaces, and woodstoves, required certified wall pass-through systems, even though none were actually available. A similar situation obtained with spark arresters and fire-resistant floor coverings. NFPA standards mandated a certified product that did not exist. Installation codes can also fall out of touch with reality. NFPA 211 calls for chimney specifications that few contractors ever follow. The portions of the National Electric Code incorporated into NFPA 61B are not really based on the conditions encountered in grain elevators. So, too, NFPA 408 is built on a rating system for fire extinguishers that has nothing to do with the aviation environment. The causes and possible remedies for these dysfunctional aspects of private standards are not clear. Private standards-setters admit that the relationship between product standards and installation codes is arcane and puzzling. Public scrutiny of the connections between private standards might provide insights and improvements.