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."^[44] 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."^[45] Such costs might be worthwhile. But, as Lawrence Bacow observes, divisive proceedings might hinder compliance.^[46] Overly formal proceedings might also limit "the rich set of informal contacts" that would otherwise enhance decisionmaking.^[47] 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."^[48] 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.^[49] 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!^[50] 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.^[51] 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.^[52] 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.