recent DISCUSSION

• hiphop says:

  “we need to make sure that more standardization does not eliminate competition between standards”

  Can you explain how multiple standards benefit consumers?

  Standards war, who is it for?
• Rebentisch says:

  Market-driven standardisation is relevant mostly for ‘public procurement’ and a substitute for regulation. Market players are free to use, develop and ignore consortial specifications as they like. When you use and develop “standards”(=de jure) then your client is the public sector. “I am not saying do nothing – not at all – but I am saying try to do no harm.” assumes a public policy agenda to promote the interests of suppliers by the public sector, a phenonemon known in neopolitical economics as “capture”. For its procurement the public sector follows its interests. For its sales the vendor follows its opposite interests. Standards are instruments of public procurement policy as to enable a level playing field and non-discrimination between suppliers. “I think Alistair has summed up rather well the balance between the need for market-driven approaches as well as strategic intervention.” Alistair does not follow the rationale of a market system and promotes a “lesser competition” approach as an alternative to a “first best” free market. Cui bono?
• Mattias Ganslandt says:

  Normative perspective: policy intervention could improve efficiency in case there is a market failure and subject to feasible means and sufficient information. Is there a market failure? Could be, due to coordination failure or due to externalities. Are there feasible means? Well, standards are not particularly good at creating incentives but rather to solve pure coordination problems. But these kind of problems tend to be solved also by markets sooner or later (thus goving little room for productive political intervention). Externalities typically need economic incentives, requiring other instruments. Is there sufficient information? Perhaps, if process remains mainly industry-driven.

  Positive perspective: standardization is associated with creation and distribution of economic rents. Therefore, the process is bound to be influenced by rent-seeking. Firms strive to get an upper hand by lobbying for particular standards. Governments are tempted to mandate requirements and to regulate in the interest of domestic producers. Institutions must therefore be resistant to rent-seeking, both commercial and political.

  /Mattias
• Helen Disney says:

  @ Rebentisch – I am not saying do nothing – not at all – but I am saying try to do no harm. I think Alistair has summed up rather well the balance between the need for market-driven approaches as well as strategic intervention.
• Alistair Buttar says:

  In the context of Helen’s statement “we need to make sure that more standardization does not eliminate competition between standards and thus narrow the marketplace”, the standards ecosystem currently tends to be self-regulating. As technology develops, companies frequently get together in “de jure” standards bodies or industry consortia to collaborate on a basic platform which allows to create a new market. If, in the process, it turns out that a particular aspect of the market is not addressed, new initiatives are created – either in the existing bodies or with the creation of new entities. Often, new use cases are identified which have potential for new products and services. If standards have already resulted in new deployments, companies should be free to add proprietary enhancements, based on investments in intellectual property, to offer new innovative products and services to end users. Competition is beneficial for offering users choice. Having competing standards is often healthy since they will “test” evolving business models, and the market typically decides which standards are best. Hence, collaboration in standards coupled with competition on top of standards usually results in the best solutions for users and healthy business for those companies (whether they are large or small) that can react to these new opportunities – whether they are national or global.
• Rebentisch says:

  “Rather than demonizing certain types of standards (or indeed promoting one form of standards over another eg closed v open or national v global) shouldn’t policymakers instead see them as a toolbox which may sometimes facilitate good policy outcomes rather than as the solution to all their problems?” That was fun, project Do-Nothing. How about this, Wolfgang Schäuble (CDU): “If you want to drain a swamp, you don’t ask the frogs for an objective assessment of the situation.” Standards are a market-driven substitute for regulation subject to certain conditions and principles.
• Helen Disney says:

  Yes, I agree that we are in a difficult time. Markets are global and policy is increasingly global as well. Yet the recent financial crisis is putting pressure on national budgets and the political impetus tends towards protectionist measures and national interests. As hard as it may be, policymakers need to try to ensure that they don’t fall into this trap and recognise that a more competitive international market will ultimately be the most beneficial to consumers.
• Mattias Ganslandt says:

  Helen, Standards that facilitate interoperability and integration are generally associated with significant rents thanks to the value of coordination. There is accordingly a significant risk that policy makers are tempted to tilt the competitive process in favor of domestic interests at the expense of foreign producers.

  Even more worrying, standards that are used to certify products or processes can easily raise barriers and hinder rather than facilitate trade. While classical trade barriers such as duties and quotas are easy to identify and measure. The same is not always true with technical barriers.

  In sum; Particularly in times of economic stress and significant trade imbalances one could expect that political-economy dynamics may result in a excessive introduction of mandated requirements through standards that have a negative effect on efficiency both locally and globally.

  Question; Isn’t the increasing political interest in global standardization a natural consequence of the declining role of the Nation State? As the economy is becoming more globalized and markets more integrated policy makers become interested in delaing with cross-border issues of economic (not only military) nature – and there are simply very few political instruments that can be used. One of the few is mandating technical requirements and norms.

  /Mattias