Enforcement Signals Under Rules and Standards

30 Pages Posted: 22 Mar 2021 Last revised: 24 Aug 2022

See all articles by Nicholas Almendares

Nicholas Almendares

Indiana University Maurer School of Law

Michael D. Gilbert

University of Virginia School of Law

Rebecca Kerley

University of Virginia, School of Law, Students

Date Written: March 15, 2021

Abstract

Enforcement is costly, so sometimes a rational government will not enforce its laws. We study the decision not to enforce under rules and under standards. We show that failing to enforce a rule sends a clear signal about the government's limited enforcement capacity.
Regulated parties can use this information and violate law to a certain extent with impunity. In contrast, failing to enforce a standard sends a noisy signal about the government's capacity, leaving regulated parties uncertain. They might violate the law even though the
government has low enforcement costs, or they might comply even though the government has high enforcement costs. The second possibility is especially surprising. According to conventional wisdom, standards are costlier to enforce than rules, meaning a switch from
rules to standards should decrease compliance. However, we show that standards, by obscuring the government's capacity, can increase compliance. We identify the specific characteristics of standards that yield these effects. Our results do not depend on regulated parties' tolerance for risk.

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

Suggested Citation

Almendares, Nicholas and Gilbert, Michael and Kerley, Rebecca, Enforcement Signals Under Rules and Standards (March 15, 2021). Virginia Public Law and Legal Theory Research Paper No. 2021-17, Virginia Law and Economics Research Paper No. 2021-07, Indiana Legal Studies Research Paper No. 439, Available at SSRN: https://ssrn.com/abstract=3804864

Nicholas Almendares

Indiana University Maurer School of Law ( email )

211 S. Indiana Avenue
Bloomington, IN 47405
United States

Michael Gilbert (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Rebecca Kerley

University of Virginia, School of Law, Students

1400 University Ave
Charlottesville, VA 22903
United States

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