Rules vs Standards

Week 2: Rules vs Standards

An Economic Analysis 

By Louis Kaplow 

Overview 

  • Definition - what are rules and what are standards
    • How are they different? 
    • What affects the cost of rules and standards?
  • A different debate: how detailed should laws be formulated and applied?
  • Extensions
  • Conclusion

When is the law given content

before

after

individual acts

Rules

Standards

"Do not exceed 55 mph on the expressway"

"Do not drive at an excessive speed on the expressway"

ex ante

ex post

(context)

When is the law given content

before

after

individual acts

Rules

Standards

ex ante

ex post

Note:

  • Author assumes that only distinction is ex ante vs ex post law creation
  • In reality, legal commands are often mixes

(context)

Framework

Law Promulgation

Law Promulgation

Law Promulgation

Legal Choice

Law Promulgation

Law Promulgation

Law Promulgation

Law Enforcement

Law Promulgation

The three stages cont'd

Standards

Rules

Individuals act

Law Enforcement

legal advice

 legal advice

legal advice

 legal advice

Law Promulgation

Law Promulgation

Law Promulgation

Individuals act

Law Promulgation

Law Promulgation

Law Promulgation

Law Enforcement

What affects the choice between rules and standards?

  1. legal cost
  2. extent to which individuals' behavior conform to the law

Standards

Rules

Individuals act

Law Enforcement

legal advice

 legal advice

legal advice

 legal advice

Law Promulgation

Law Promulgation

Law Promulgation

Individuals act

Law Enforcement

Where do costs come in?

Standards

Rules

Individuals act

Law Enforcement

legal advice

 legal advice

legal advice

 legal advice

Law Promulgation

Law Promulgation

Law Promulgation

Individuals act

Law Promulgation

Law Promulgation

Law Promulgation

Law Enforcement

💰 promulgation cost

💰 prediction cost

💰 enforcement cost

Example: disposal of hazardous substances 

Dry cleaning; automative fluids?

  • Rules

Radioactive water? 

  • Standards

What affects legal cost? 

Frequency

💰

Standards

Rules

Individuals act

Law Enforcement

legal advice

 legal advice

legal advice

 legal advice

Law Promulgation

Law Promulgation

Law Promulgation

Individuals act

Law Promulgation

Law Promulgation

Law Promulgation

Law Enforcement

💰

💰

and consequently, desirability?

What affects legal cost? 

Rules

Frequent application in recurring fact scenarios:

  • traffic laws 
  • federal income tax 
  • law of damages 

Standards

laws that govern more heterogenous behavior

  • law of negligence 

\(\rightarrow\) depends on whether individuals choose to acquire legal advice before they act 

Individuals' behavior conform to law? 

  • reduced cost to learn the law 
  • better legal compliance 

💰

Rules

Individuals act

Standards

Law Promulgation

Law Promulgation

Law Promulgation

Individuals act

legal advice

 legal advice

legal advice

 legal advice

💰

A common suggestion

Rules tend to be over- and/or under-inclusive compared to standards.

  • implicitly comparing a complex standard and a simple rule \(\to\) not fair! 
  • should be comparing a standard to the rule equivalent to that standard 

Two issues

ex post or ex ante law creation

(time of law creation)

\(\neq\)

appropriate degree of detail in law

(complexity)

A concrete example 

Q: Who may pilot commercial aircrafts? 

Rule

Standard

simple

complex

no one over age 60

No one who falls in any of a number of categories detailing combinations of values of variables that bear on accident risk.

No one who poses an unreasonable risk of accident

A concrete example 

Q: Who may pilot commercial aircraft? 🛫 

Rule

Standard

simple

complex

no one over age 60

No one who falls in any of a number of categories detailing combinations of values of variables that bear on accident risk.

No one who poses an unreasonable risk of accident

no one over age 60

\(\to\) de facto simple 

no one over age 60

Main arguments from Part II

  • There is no universal tendency for standards to be more complex than rules 
  • To prefer complex standards to simple rules implies 
    • complexity \(\succ\) simplicity
    • rule \(\succ\) standard 
    • combination of both 

Extension 1: Standards to Rules 

Standards

Rules

Individuals act

Law Enforcement

legal advice

 legal advice

legal advice

 legal advice

Law Promulgation

Law Promulgation

Law Promulgation

Individuals act

Law Promulgation

Law Promulgation

Law Promulgation

Law Enforcement

precedent

💰

💰

💰

Frequency

Extension 2: Does the framework still hold now?

(1992)

individual acts

Rules

Standards

Does the framework still hold now?

(1992)

💰

💰

💰

Rules

Individuals act

Law Enforcement

Standards

Law Promulgation

Law Promulgation

Law Promulgation

Individuals act

Law Promulgation

Law Promulgation

Law Promulgation

Law Enforcement

legal advice

 legal advice

legal advice

 legal advice

Does the framework still hold now?

(1992)

💰

Dynamic Rules

Law Promulgation

Law Promulgation

Law Promulgation

Individuals act

Law Promulgation

Law Promulgation

Law Promulgation

Law Enforcement

legal advice

 legal advice

💰

Some questions I had...

  • How does "rules vs standards" apply in emerging fields? (e.g. Tech regulation) 
  • Has rate of convergence (from standards to rules) changed throughout the years? 
  • ex post vs ex ante -- is this a good distinction to focus on? What else could we focus on? 
  • mixes - which aspects of a legal command should be resolved in advance? Which aspects should be left to the adjudicator? 

Conclusion

  • distinction between rules and standards 
    • ex ante vs ex post law creation 
  • relative desirability \(\to\) legal costs \(\to\) frequency 
  • complexity \(\neq \) time of law creation 

Rules vs Standards

By Sheng Long

Rules vs Standards

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