The Standard Is the Market

Regulation is imagined as an agency issuing a rule. A great deal of the work that determines what may be manufactured, sold or connected to a network is done earlier, by standards bodies whose proceedings are technical, voluntary and largely unobserved.

A standard specifies how a thing is measured, what it must tolerate, and how it interoperates. Compliance is nominally optional. In practice a product that does not meet the relevant standard cannot be insured, procured or connected, which is not optionality in any sense a manufacturer would recognise.

The federal government leans on this deliberately, and says so. Agencies are directed to use existing voluntary consensus standards rather than write their own wherever they can, which is efficient and which also transfers a share of regulatory authorship to private bodies.

A rule written by an agency is subject to notice, comment and review. A standard incorporated into that rule was written somewhere else, by whoever showed up.

Showing up is the whole of it. Standards work is slow, technical, and conducted over years of meetings. Participation requires a salary that permits it, which means the people in the room are overwhelmingly employed by the firms with the most at stake in the outcome.

That is not a scandal, and the resulting standards are usually competent, because the participants are the people who genuinely know the subject. The difficulty is narrower: competence and interest are not separable here, and the process has no mechanism for distinguishing them.

The competitive effects are substantial and rarely discussed as policy. A standard written around one manufacturing method is a barrier to firms using another. A test procedure that requires particular equipment is a fixed cost that a small producer cannot amortise.

Once a standard is referenced in a regulation, that barrier acquires the force of law without ever having been argued as law.

There is also a transparency problem peculiar to this arrangement. Many standards are copyrighted by the bodies that write them and sold rather than published, which means a requirement that is legally binding can sit behind a paywall.

Courts and agencies have wrestled with that, and the direction of travel is toward availability. It remains an odd position: the obligation is public, and the text stating it is a product.

The useful reforms are procedural rather than substantive. Fund participation for people who do not have an employer with a commercial interest. Require agencies to state, when they incorporate a standard, what competitive effect they considered. Make anything with the force of law readable without payment.

None of that displaces the expertise, which is real and which the government could not replicate. It only insists that a rule with legal effect should be arrived at by a process that can be described in public, and that whoever fixes the unit should have to say why.