Mr. Bowen at No Watermelons Allowed has a nifty post up about private-sector standards, specifically mentioning one company he used to work for.
I've written before that some non-zero level of regulation is beneficial to society -- and I think that's true -- but much of the regulatory burden imposed by the government could be privatized and handled by companies such as ASTM International.
What's with ASTM, anyway? It is the acronym for the organization's original name, the American Society for Testing and Materials. Libertarians should love these guys, because they implement voluntary standards for materials that can be adopted in contracts and laws. The standards themselves are created primarily by subject matter exports who are familiar with the state of the art, not a pack of bureaucrats whose major consideration is self-perpetuation.And so forth. Companies could offer standards and testing at competitive prices, and then customers could listen to their recommendations and make their own decisions. Insurance companies could underwrite projects based on the evaluations of the standards companies, and everyone involved would have an economic interest in developing adequate standards. Unlike government standards, it would be easy to pin the blame when things don't turn out well. People could be fired, heads could roll, and reimbursements could be made from private funds. If criminal negligence was involved, people could be jailed; try sending a failed civil servant to jail when they screw up!So what do they provide standards for? Just about anything. Soils for instance - wouldn't you like to know if your house is likely to go sliding off a cliff? ASTM has a test for the so-called "liquid limit" of soils, which can be used by civil engineers to measure soil stability.
Standards companies would build reputations, giving weight to their seals of approval. Their business would be directly tied to the success of their standards, and their insurance company clients would have a great incentive to minimize costly disasters. The only required government involvement would be ensuring that the companies provide truthful and accurate information to their customers.
It's not only reputational weight that voluntary standards compliance would affect but insurance premiums. I'd expect that in an unregulated market, my fire insurance premiums would be affected not only by my safe house but my neighbors firetrap. If five neighbors are each having a monthly premium rise of say $60 due to your lack of standards certification and adequate insurance, you can bet you'll have pissed off neighbors who will insist on compliance.
That's an interesting point, and there are some situations like that (such as fire and police, and so forth). But most standards won't have that same effect. Well, that's arguable... some standards won't. If your house slides down into the ocean, no problem, but if it slides onto my house, that's bad.
I'm not really had hard-core libertarian, but I think we could move pretty far in that direction.
I think we can hack down regulation until it boils down to the following points:
If what you're doing could hurt innocent bystanders, you'll have to get liability insurance. It it could hurt your customers, they'd better be informed of the risks. If it could only hurt you, have at it and good luck.
That should apply to every activity. Including operating groundcars and aircraft. If you let competing insurance companies vet aircraft and aircraft pilots, they'll do a better job at much less cost to the pilot than the FAA does, encourage the development of more foolproof controls rather than insisting that only highly-trained pilots able to use primitive controls may fly, and ultimately increase air traffic to all of our benefit.
Ken: I agree with you in theory, but who regulates the insurance companies? Meta-insurance companies? Plus, such a scheme would subject everyone to tort judgements for everything, giving judges and lawyers even more power. At least under the current system the vast majority of disputes can be resolved by executive officers referring to legislative decisions.
I like the idea of drastically cutting regulations, but I'm not sure where the optimal level is. In a sense, government regulations work as a socially-created community insurance company.