Should regulatory review be handled by the private sector?

Here’s an example from real life.

The manufacture and running of power boilers are generally not directly regulated by any state or federal agency in the United States. Fact. (Some states do have their own ‘boiler laws’, but those are very few and very exceptional – and in most cases even they defer to rules drafted by… boiler manufacturers.) Most states defer boiler inspections to the few insurance companies who regularly insure them, such as Liberty Mutual and Hartford Steam Boiler, who train and employ inspectors from coast to coast.

This all started back in the dawn of the Industrial Revolution when we first started using power boilers for driving steamships and railroads. There were a lot of problems, a lot of explosions and a lot of catastrophe from poorly manufactured (and operated) steam engines. (I think it was Huckleberry Finn where Mark Twain vividly re-creates a fairly typical incident: paddleboats racing each other on the Mississippi, and one of them blows up because of the excessive pressure generated during the race.)

The problems started to get worse as we started to make more and more massive power boilers to drive steam turbine-generator sets to produce electricity.

What happened was that the manufacturers, designers, constructors, owners and operators of the plants – and their insurance companies – got together and started what is now known as the American Society of Mechanical Engineers Boiler and Pressure Vessel Code (“the Code” as we call it in the industry; it needs no more name than that, even though now the “Power Boiler” code is just “Section I” of a 12-section set of volumes, and other international codes also exist that do the same things that ASME does, in different ways). Over the years as materials, construction methods, techniques of operation, instrumentation and controls have all improved, so has the Code.

Boilers today operate at obscenely high pressures, at duty cycles that few other machines in our lives see, for decades at a time – and when was the last time you heard of one blowing up? Wherever you live in the world, probably the majority of your electricity is provided by steam-driven turbine-generator sets. (If they’re powered by nuclear-generated steam, that’s covered by Section III of the Code.)

And yet, membership is ASME is voluntary. Manufacturers are not required to have representation in it (although it is highly desirable), and subscription to it is optional – unless a manufacturer wants to stay in business. No one in North America will buy a non-ASME power boiler, even in the few places where they might possibly be able to. That’s because no insurance company would cover it, even if the state didn’t mandate that “boilers must be built and maintained according to the rules of ASME Section I”.

The private sector is absolutely a workable way to promote industry standardization on technical matters, self-regulation and promotion of new and improved technology. (We’re building boilers today that engineers weren’t even dreaming about 50 years ago, even though for my entire professional life I’ve thought “these things are dinosaurs; I can’t wait to see what will replace them… any day now…”.) And yet, we still build them bigger, and better (more efficient in extracting energy from fuel, and more powerful, to boot), and safer than ever.

@WasCy – That’s a great example – but that’s industry self-regulation.

I don’t think that we’re going to get to a point where we forgo any type of government regulation for industry/business/education etc., which I think is a good thing. This is about using the private sector to fuel a committee responsible for and empowered to do regulatory review to ensure that regulations are doing more good than harm – and eliminating of fixing those that are broken.

@WasCy

That was a great example. It is not the only place where industry has regulated itself with outstanding results. The Internet is another good example where industry has created standards that have improved quality and speed, added features and done it all with compatibility between systems.

The problem we get into with government regulation is that it is not a group of knowledgeable people. It is a bunch of lawyers in Washington the have little knowledge of what they are regulating. Consequently, it is prone to influence. Lobbyists are knowledgeable (or in some cases just influential) but they aren’t arguing with each other they’re trying to persuade a bureaucrat that their way is better. The solution is not always what’s better for the industry or the consumer but rather what’s better for the congressmen. With little knowledge of the issue, they go with who’s most persuasive or which is best politically.

You’ll never get to the best solution, the best standards, or the most efficient answer, unless industry experts are creating them.

@iamthemob

I think you missed my point, but thankfully @Jaxk got it. My point is that if it’s allowed to, “industry self-regulation” can work better than “government regulation with a sop to the private sector’s lobbyists for ‘review’”. In the industry I cited, self-regulation works better to manage safety – first and foremost – and still allows for more improvement in technology at the same time. I don’t see why that can’t be the model to be followed, rather than the present system where the various interested parties (such as with automobile regulation, for one common example) meet in Washington and lobby Congress and the various “regulatory agencies” for promotion of their pet ideas, and then we get idiotic notions such as CAFE Standards for auto makers’ fleets of vehicles. (And this is promoted as “one of the better and less controversial” methods of regulating that industry.)

@WasCy

I’m not sure whether I’m happy or sad that you mentioned the ‘Cafe Standards’. Now I wandering the house trying to figure out if I should go a rant about it. If I had to draw the decline of the American auto industry to a single issue, the moronic Cafe Standards would be where I would go. I’ll stop there before I get myself all worked up.

@WasCy – Not missing the point, but the question was not about whether or not the industry could regulate itself better or more efficiently in some areas. I completely agree.

This is about the program to review the current regulatory system from a cost-benefit perspective. Your point about industry self-regulation is well taken, but I was just trying to turn things back to the type of body suggested by the executive order.

@WasCy

I ran across this article which pertains directly to boilers. Your example may be getting out of date. The pertinent section is:

“Boiler MACT: In June 2010, the EPA proposed the National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial, and Institutional Boilers and Process Heaters. Also referred to as the “Boiler MACT” rule, this proposal sets limits on mercury, hydrogen chloride, and air pollutants. While reducing these emissions is necessary, the EPA’s proposed rule is so stringent that virtually none of the covered entities will be able to comply with it. For example, the Industrial Energy Consumers of America (IECA), which represents several companies employing roughly 750,000 people, has noted that of their six best performing units, “none can comply with the standards” as set forth by EPA. If covered sources cannot meet the requirements, the result will be either perpetual and economy-wide noncompliance, or a complete shut down of industry. In fact, the regulation would be so costly that a bipartisan group of U.S. Senators (18 Democrats and 23 Republicans) wrote to the EPA in September 2010 asking for the EPA to scrap the boiler rule and start over.”

Apparently the EPA heard you argument and is working to fix it.

So that’s part of the argument, the assertion that EPA regulations could cost jobs. But what’s the other side of it? Left unregulated, the companies will continue to pollute. The knee-jerk reaction is that compromise is necessary, but what if the EPA is simply requiring healthy levels of pollution?

So as a society, do we accept certain health problems, not having the gov’t correct for externalities like pollution by fining if regulations aren’t met, or do we think jobs and pollution are less important than health?

Food for thought for certain. Just because we aren’t geared up to stop doing harm to the environment doesn’t mean we just continue to harm the environment. Something has to push polluters in the right direction, or they will have zero incentive to change.

@cockswain

The easy thing, then, is to stop using electricity generated by polluters. Simple, really. You first.

In any case, my essay was on the pressure-containing parts of the boiler that produce and direct the steam. There have been plenty of regulations on the back end for many years: emissions in particular, but also disposal of ash and waste water.

Going from one extreme to the other isn’t wise. Might as well ban the burning of oil. That is obviously not what I’m suggesting since I’m not extreme. But I also think that it should be clear that billions of people all striving for the lifestyle available in the US is clearly not sustainable and would wreak havoc on the environment. So it seems prudent to have the government perform a useful role by creating incentives to change in a better direction.

What’s the alternative? Hoping everyone will just do the right thing on their own and stop purchasing any product or service that isn’t nearly sustainable? We know that won’t happen, but the clock continues to tick and the resources are finite.

This is really the biggest problem in the world to me. Moving everything towards sustainability (which requires people to demand it), and creating jobs in all those efforts in tandem. Globally too. Solve that one and I’ll shake your hand.

Actually, it’s a common fallacy to think that “if everyone had the lifestyle that Americans have we’d sink the planet” (or whatever other more realistic dire consequence is envisioned). The fact is that only rich countries can afford the types of pollution controls that the United States, Canada, Western Europe, Australia, Japan, Singapore and some other places enjoy. I’ve been to China, to places where you can’t see the sun at midday on an otherwise ‘clear’ and ‘good weather’ day. They’ll have pollution controls one day, one hopes sooner rather than later. India will, too.

But that’s not going to happen until the money is produced in and by their economies to enable that. I hope they all reach American standards of living (or whatever parts of that standard of living they want) very soon.

It’s a clusterfuck. The difference between when the US started doing what China and India are doing now is we didn’t know what we know now. So it’s more grave to see them doing these things since we know what it is doing. Yes, I realize that without money and people demanding their processes be cleaner, it won’t happen. But that doesn’t change the fact it needs to, and the Chinese and Indian gov’ts need to play a critical role in that.

China is actually producing renewable energy infrastructure at a far greater rate than the US. They are smart, and can do what they want without having to jump through the political hoops like in the US. Not saying I’m a fan of the Chinese gov’t with regard to human rights, but you’ve got to admit there are certain advantages.

@cockswain

I don’t know if you read the article. It doesn’t suggest we do away with environmental protection but rather that we do it in a more responsible fashion.

A couple of years ago the EPA shut down the pumps that provide water to the central valley in California. Apparently the Delta Smelt (a small 2 inch fish) were getting caught in the pumps killing a substantial number of them. So the EPA solution was to shut down the pumps. The central valley is the most productive farm land in the country supplying fully 25% of all fruits and vegetables we consume. Additionally the central valley water tables were diminishing at a rapid rate.

By shutting down the pumps, California farmers began to go bankrupt and unemployment in many communities have reached 50%. Farms that were productive are now sitting idle and going to seed, costing California’s economy billions. Orchards that took decades to grow are now dead. The lack of water has further increased the amount of ground water pumping exacerbating the already diminishing water tables. There are better solutions. We pump most of the water from the western states to quench the thirst of LA. Some southern California communities are taking the bull by the horns and creating systems to feed their own water needs. But these actions are being fought tooth and nail by the EPA and environmentalists.

The EPA doesn’t care. They have one charter and that is the environment and no charter to find the most efficient or productive solution. They are and have been totally out of control and create as many problems as they fix. A better solution is to partner industry with government to create solutions that are technically the best and provide both the environment and industry a way to work together. An agency full of bureaucrats is not going to solve our problems as the world becomes more complex. We need a team effort and continuing to paint industry as the evil enemy is not going to solve our problems. It will only deteriorate the economy further.

Like an asshole, I didn’t read the article and made assumptions about what it may have been about from the context of your answer. My bad. But if I had been responding to the question I imagined, I may have had an ok response.

The story you describe above is outrageous. I do care about the environment, but killing the water supply to a state already in fiscal crisis to harm our food supply is just dumb. In this particular case, I could give two shits about these fish. But that is only with the information you’ve given me. If I assume you’ve given me all the information, then the EPA has acted stupidly. If there are other reasons behind their decision that you may have excluded because you are unaware, that could obviously influence my thinking.

But I do want to discuss some points you raise. I don’t think we can demonize the entire EPA (and by extension, the bureaucrats of any gov’t agency) because of mistakes like this. We can demonize the cases when they have made errors, and applaud them when they have done good. No matter the agency, it is comprised of error-prone humans. However, I completely agree with your idea that if industry can successfully work with gov’t, this is more likely to create an optimal solution. I’m glad you put forth an idea instead of pure criticism.

I think what you’re getting at is the notion it is a problem that a gov’t agency has the absolute authority and doesn’t need to compromise, like with the EPA. They decided the stupid smelt were more important than the farmers.

I agree this can be a problem, but we also can’t just leave externalities to private industry either. Gov’t needs to perform a role in which it corrects these problems because no company will ever be motivated to harm their profits if they don’t really have to (unless for PR reasons). This is what I see as a more ideal role of gov’t.

Here’s a thought: lobbyists are elected by communities to serve as mediators between gov’t agencies and private industries.

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@cockswain

“Here’s a thought: lobbyists are elected by communities to serve as mediators between gov’t agencies and private industries.”

I can’t see where that would solve anything but would put another government agency into the loop. The government is already supposed to represent the communities. How about they have the Government define the problem and let Industry solve it. If the solution solves the problem, it becomes regulation. Right now we have a system where government defines the problem and creates the solution. The only input from industry is through lobbyists which isn’t getting the job done.