Enforcement and Learning Under Rules and Standards

Abstract

Enforcement is costly, so sometimes states choose not to enforce their laws. We study this choice under rules and under standards. We show that non-enforcement of rules sends a relatively clear signal about state capacity. Regulated parties can use this information and violate law to some extent with impunity. Non-enforcement of standards sends a noisier signal, and this uncertainty may cause regulated parties to comply with law even though the state lacks capacity to enforce, a surprising implication. According to conventional wisdom, standards are costlier to enforce than rules, meaning a switch from rules to standards should decrease compliance. However, we argue that standards, by obscuring the state’s capacity, can increase compliance. We identify the characteristics of standards that yield these effects, and we show that the logic generalizes to the complexity of law as well as its precision.

Keywords: rules and standards, enforcement, enforcement and learning, exceptions