1 George J. Stigler,” The Theory of Economic Regulation,” 2 Bell J. Econ. & Mgmt. Sci. 3 (1971); Sam Peltzman,” The Growth of Government,” 23 J.L. & Econ. 209 (1980).CrossRefGoogle Scholar

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6 Scholz, 18 Law & Soc'y Rev. at 189.Google Scholar

7 Antony E. Simpson, The Literature of Police Corruption 88–108 (New York: John Day Press, 1977).Google Scholar

8 Braithwaite, John, Grabosky, Peter, 1 & Rickwood, Debra, “Research Note: Corruption Allegations and Australian Business Regulation,” 19 Australian & New Zealand J. Criminology 179 (1986).CrossRefGoogle Scholar

9 Herbert Kaufman, The Forest Ranger: A Study in Administrative Behavior (Baltimore: Johns Hopkins Press, 1960); Grabosky & Braithwaite, Of Manners Gentle 198.Google Scholar

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11 Scholz, John T., “Voluntary Compliance and Regulatory Policy,” 6 Law & Pol'y 385 (1984); Bruce A. Ackerman & William T. Hassler, Clean Coal/Dirty Air (New Haven, Conn.: Yale University Press, 1981); Eugene Bardach & Robert A. Kagan, Going by the Book: The Problem of Regulatory Unreasonableness (Philadelphia: Temple University Press, 1982) (“Bardach & Kagan, Going by the Book”).CrossRefGoogle Scholar

12 This differs from the role that Scholz, 18 Law & Soc'y Rev. at 216–17, considers for interest groups–influencing regulators as factors in the external environment.Google Scholar

13 Axelrod, Robert, “An Evolutionary Approach to Norms,” 80 Am. Pol. Sci. Rev. 1094 (1986).Google Scholar

14 E.g., (Kit) Carson, W. G. & Henenberg, Cathy, “The Political Economy of Legislative Change: Making Sense of Victoria's New Occupational Health and Safety Legislation,” 6 Law in Context 1 (1988).Google Scholar

15 Martin Shapiro, Who Guards the Guardians? Judicial Control of Administration (Athens: University of Georgia Press, 1988) (“Shapiro, Who Guards?”).Google Scholar

16 Shapiro, Susan, “The Social Control of Impersonal Trust,” 93 Am. J. Soc. 623 (1987).CrossRefGoogle Scholar

17 William J. Baumol, John C. Panzar, & Robert D. Willig, Contestable Markets and Theory of Industry Structure (New York: Harcourt Brace Jovanovich, 1988).Google Scholar

18 Few markets in modern economies could be characterized as “contestable.” For example, while some commentators have suggested that U.S. airline routes might be contest-able markets (Bailey, Elizabeth & Panzar, John, “The Contestability of the Airline Markets during the Transition to Deregulation,” 44 Law & Contemp. Probs. 125 (1981)), several studies have rejected the empirical implications of contestability (Ayres, Ian, “Determinants of Airline Carrier Conduct,” 8 Int'l Rev. L. & Econ. 187 (1988). G. D. Call & T. E. Keeler,” Airline Deregulation, Fares and Market Behavior: Some Evidence,”in Andrew F. Daugherty, ed., Analytical Studies in Transport Economics (Cambridge: Cambridge University Press, 1985)).CrossRefGoogle Scholar

19 This contestability phenomenon can be illustrated by the way the Australian Federation of Consumer Organizations (AFCO) exercised responsibility for putting representatives on Standards Association of Australia (SAA) committees during one of the authors' tenure at AFCO during the early 1980s. AFCO trusted SAA to warn it when a consumer representative might be needed on a particular committee because the standard being written involved product safety or other issues of concern to the consumer movement. The trust was based on a realistic perception that if AFCO was not told up front, it would be likely to find out later and cause political grief for SAA. Because of lack of resources, AFCO accepted invitations on only about 50 standard setting committees at any time. But it also sometimes declined representation “for the time being” and asked to receive draft standards and minutes of minutes to “see how things develop.” Such a posture signals contestability at the same time as participation is declined. This notion of contestability is at odds with the view that “what really matters under the interest group theory of administrative law is who actually participates, not who theoretically could.” Ross Cheit, Setting Safety Standards: Regulation in the Public and Private Sectors 214 (Berkeley: University of California Press, 1990) (“Cheit, Setting Safety Standards”).Google Scholar

20 This is the idea of the qui tam suit relied on heavily in England during the 14th and 15th centuries. Qui tam private prosecutions continue to be available under a number of U.S. statutes. The U.S. Congress has recently revitalized the idea under the False Claims Act (31 U.S.C.A. §§ 3729–3731 (West Supp. 1989)). The result has been a rash of private prosecutions largely of defense contractors suspected of defrauding the Federal Treasury (Evan Caminker,” The Constitutionality of Qui Tam Actions,” 99 Yale L.J. 341 (1989)). Crumplar, Thomas C., “An Alternative to Public and Victim Enforcement of the Federal Securities and Antitrust Laws: Citizen Enforcement,” 13 Harv. J. Legis. 76 (1975), has supported the qui tam idea in the domain of the Securities and Exchange Commission, and Brent Fisse & John Braithwaite, The Impact of Publicity on Corporate offenders 250–54 (Albany: State University of New York Press, 1983), have done so more generally. More broadly, on the concept of the private attorney-general, see Garth, Bryant, Nagel, Ilene H., & Jay Plager, S., “The Institution of the Private Attorney General: Perspectives from an Empirical Study of Class Action Litigation,” 61 S. Cal. L. Rev. 353 (1988).Google Scholar

21 The process of selecting the NGO to be privileged in negotiation raises difficult issues of the legitimacy of exclusion. Joshua Cohen & Joel Rogers,” Secondary Associations in Democratic Governance” (unpublished, University of Wisconsin, Madison, 1990), have argued that the proper solution to this moral dilemma is to make decisions about which NGOs will be accorded a quasi-public status under conditions in which the views of each citizen are accorded equal weight. This can be accomplished by making the choice of NGOs, the criteria of their selection, and the accountability rules NGOs must satisfy, themselves the object of popular political choice through democratic institutions. That is, political parties would be expected to include in their election platforms policies about which NGOs or NGO peak councils would be privileged as representatives of labor, environmental, and consumer groups and how and under what conditions they would be privileged. An alternative arises from Schmitter's proposal for a voucher system of state support for NGOs. Phillipe C. Schmitter,” Corporate Democracy: Oxymoronic? Just Plain Moronic? Or a Promising Way Out of the Present Impasse!” (unpublished, 1988). All citizens would get vouchers, representing a promise of funds to be paid out of consolidated revenue to NGOs. The state could then be considered to privilege the NGOs that received the most vouchers.Google Scholar

22 The initiatives of U.S. Environmental Protection Agency Administrator Ruckelshaus in introducing “regnegs,” tripartite regulatory negotiation over standards, have been generally well received as an advance over litigious rulemaking, but have been criticized for their “closed shop” features. Richard A. Harris & Sidney M. Milkis, The Politics of Regulatory Change: A Tale of Two Cities 304–5 (New York: Oxford University Press, 1989) (“Harris & Milkis, Politics of Regulatory Change”); Barry Boyer,” The Federal Trade Commission and Consumer Protection,”in Keith Hawkins & John Thomas, eds., Making Regulatory Policy (Pittsburgh: University of Pittsburgh Press, 1989).Google Scholar

23 John Keane, Democracy and Civil Society (London: Verso, 1988).Google Scholar

24 Cheit, Setting Safety Standards 77, gives a number of illustrations from the U.S. standard-setting domain: insurance industry representatives pushing for tough standards that control losses; vendors of safety equipment with obvious interests in safety; representatives of gas utilities whose employees must confront the victims of product injuries.Google Scholar

25 A related solution is partial industry regulation, where a dominant firm in an industry is regulated, while other firms are free to compete as they like. (Ian Ayres & John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (New York: Oxford University Press, 1992) (forthcoming) (“Ayres & Braithwaite, Responsive Regulation”). The theory here is that regulation of, say, the prices of the dominant firm will be designed to protect the public interests from abuse of market power, while price competition from the unregulated sector will threaten any benefits the dominant firm could obtain by capturing the regulator. The unregulated fringe firms, under this theory, would be the best placed NGOs to guard the workings of the industry from the harms of regulatory capture. Both tripartism and partial industry regulation are forms of regulatory delegation that are underwritten by escalating (and increasingly undelegated) forms of government intervention. In Responsive Regulation we propose that certain regulatory tasks might be delegated to private parties (NGOs, the firms' competitors, and even the firms themselves) but that this delegation be reinforced by traditional forms of regulatory fiat–if delegation fails.Google Scholar

26 Errol Meidinger,” Regulatory Culture and Democratic Theory” 30 (Working Paper, Baldy Center for Law and Social Policy, State University of New York, Buffalo, 1987) (“Meidinger, ‘Regulatory Culture’”).CrossRefGoogle Scholar

27 Id. at 31.Google Scholar

28 Stewart, Richard B., “Regulation in the Liberal State: The Role of Non-Commodity Values,” 92 Yale L.J. 1537 (1983).CrossRefGoogle Scholar

29 Macey, Jonathan, “Promoting Public-regarding Legislation Through Statutory Interpretation: An Interest Group Model,” 86 Colum. L. Rev. 223 (1986).CrossRefGoogle Scholar

30 Ellen Baar,” A Balance of Control: Defining the Risk Bearer's Role in the Regulatory Equation” (presented to Annual Meeting of the Law & Society Association, Madison, Wis., June 1989).Google Scholar

31 Roger Fisher & William Ury, Getting to Yes: Negotiating Agreements Without Getting In (London: Business Books, 1981) (“Fisher & Ury, Getting to Yes”).Google Scholar

32 See Walker, Jack L., “The Origin and Maintenance of Interest Groups in America,” 77 Am. Pol. Sci. Rev. 390 (1983).CrossRefGoogle Scholar

33 Roberto M. Unger, False Necessity (Cambridge: Cambridge University Press, 1987); Joel F. Handler, The Conditions of Discretion: Autonomy, Community, Bureaucracy (New York: Russell Sage Foundation, 1986); id.,” Community Care for the Frail Elderly: A Theory of Empowerment” (unpublished, 1989).Google Scholar

34 Scholz, 18 Law & Soc'y Rev. (cited in note 4); id., 6 Law & Pol'y (cited in note 11).Google Scholar

35 Axelrod, Robert, “Effective Choice in the Prisoner's Dilemma,” 24 J. Conflict Resolution 3 (1980); id., Evolution of Cooperation (cited in note 5).CrossRefGoogle Scholar

36 Scholz's model implicitly assumes that the agency and regulated firm move simultaneously. While simultaneity abstracts from real-time enforcement, this assumption is standard in the literature (see Axelrod, Evolution of Cooperation). For the single-period game, joint defection would ensue if either the agency or the firm were given the opportunity to move first. In the capture model, one can think of the firm lobbying and choosing to cooperate or defect before the agency moves. Capturing, then, besides changing the agency's payoff, also gives the firm a first-mover advantage.Google Scholar

37 Scholz, 18 Law & Soc'y Rev. at 187.Google Scholar

38 We imagine in many regulatory contexts that agencies would not have the temptation incentives to deviate from joint cooperation equilibria—because the temptation payoff from defection would not in fact be higher than an agency's joint cooperation payoff. In such situations, the regulatory game would change from Scholz's (and Axelrod's)” two-sided” prisoner's dilemma. Eric Rasmusen, Games and Information 94–96 (New York: Blackwell, 1989) (“Rasmusen, Games”). In two-sided prisoner's dilemmas, joint cooperation can be undermined by either side defecting (with the resultant retaliation), while in a one-sided prisoner's dilemma, only one player has an incentive to defect. One-sided prisoner's dilemma games still will often lead to joint defection equilibria. For example, even if the agency has no incentive to defect from joint cooperation, there will be joint defection via firm defection. The firm may still have incentives to defect from cooperative agency enforcement and the agency will still have incentives to retaliate against such defection. The implications of capture and the evolution of cooperation on such one-sided games are explored below in note 49. Alternatively, we imagine that the agency defection path to a joint defection equilibrium might be blocked by a firm's reluctance to retaliate. If the firm's punishment payoff (for complying with the letter but not the spirit of the law) is less than its sucker payoff, then the Nash equilibrium will become firm cooperate/agency defect. Scholz's implicit claim is that the firm's punishment payoff will exceed its sucker payoff because agencies will not be able to impose large fines on literal (if not spiritual) compliance. When, however, high punishments deter firm retaliation, firms will retain incentives (as discussed below) to capture regulators to move either to a joint cooperation or a firm defect/agency cooperate equilibrium.Google Scholar

39 As Scholz defines it: “The discount parameter is the product of two factors that jointly determine the current value of future payoffs: the first is the standard discount rate used to determine the current value of future rewards, and the second is the perceived probability in any given round that there will be another round.” Scholz, 18 Law & Soc'y Rev. at 189.Google Scholar

40 Rasmusen, Games.Google Scholar

41 Scholz, 18 Law & Soc'y Rev. at 188.Google Scholar

42 Scholz attempts to extend Axelrod's result by calculating preconditions of stable cooperation if the firm reevaluates its TFT strategy in midstream after evading. Id at 190. This rather convoluted scenario is homologous to an initial TFT strategy that presumes guilt instead of innocence–by choosing to defect until the opponent cooperates (instead of cooperating until the opponent defects). The game theory literature is rich with alternative assumptions that place alternative restrictions on TFT stability (see, e.g., Boyd, Robert & Larberbaum, Jeffrey P., “No Pure Strategy Is Evolutionary Stable in the Repeated Prisoner's Dilemma Game,” 327 (6117) Nature 58 (1987)). Scholz's and Axelrod's multiperiod formulation is an example of a supergame or metagame that has become a standard way of modeling multiple period strategic interactions. See Rotenberg, Julio J. & Saloner, Garth, “A Supergame-theoretic Model of Price Wars During Booms,” 76 Am. Econ. Rev. 390 (1986).CrossRefGoogle Scholar

43 Ayres, Ian, “How Cartels Punish: A Structural Theory of Self-enforcing Collusion,” 87 Colum. L Rev. 295 (1987). Accordingly, joint cooperation will be stable only for sufficiently small discount or interest rates. This makes intuitive sense. If players discount future payoffs (because they have a high discount rate) the threat of future punishment will not deter the temptation of today's defection.CrossRefGoogle Scholar

44 The latter assumption implies that V_ft(i,j) = V_at(j,i)for all i or j. The assumption of symmetric payoffs does not affect our results. If the agency and firms have asymmetric payoffs so that, for example, T_f≠ T_a, then the captured agency's net temptation to defect, Δ_tempt, will be Δ_tempt=α(S _f-R _f) + (1-α) (T _a-R _a), which equals the change in the captured agency's payoff for defecting from a joint cooperation equilibrium. Similarly, the captured agency's net incentive to retaliate against firm defection, Δ_retal, will be Δ_retal=α(P _f-T _f) + (1-α) (P _a-S _a), which equals the change in the captured agency's payoff for retaliating against a firm defect/agency cooperate equilibrium. Under this more general formulation, increasing degrees of capture (increasing α) reduces both the agency's temptation to defect from joint cooperation and the agency's incentive to retaliate against a defecting firm (both Δ_tempt and Δ_retal decrease). This parallels in all relevant respects the effects of capture in the symmetric model (increasing S′ and decreasing T′).Google Scholar

45 If repeated joint cooperation is supportable, then an infinite number of less profitable equilibria will also be stable (e.g., the symmetric strategies of defecting in the first period and playing TFT thereafter would be stable). This result is ensured by the venerable Folk Theorem of game theory (so named because no one can remember who should get credit for it) (Rasmusen, Games). We restrict our attention to repeated joint cooperation equilibria on the plausible assumption that the players will choose the supportable equilibrium with the highest payoff.Google Scholar

46 As stated above, efforts to capture also reduce the agency's temptation payoff. The temptation effect may induce a separate form of capture that we discuss below.Google Scholar

47 This net improvement would satisfy the Kaldor-Hicks welfare standard. One equilibrium is Kaldor-Hicks superior to another if those receiving more (the “winners”) could potentially compensate those receiving less (the “losers”) so that, after this hypothetical compensation, no one would be worse off and at least one person would be better off. Richard A. Posner, Economic Analysis of Law (Boston: Little, Brown, 1986).Google Scholar

48 At times, the enhanced firm payoffs from zero-sum capture will represent a bare redistribution of wealth from other members of the society; e.g., regulation might increase a corporation's sales (and profits) by displacing or excluding one of its competitors. Yet this redistribution of profits is likely to be accompanied by production inefficiencies. Moreover, the process of lobbying to change the regulator's payoffs will often entail an inefficient consumption of real resources.Google Scholar

49 Pareto-efficient capture may also facilitate the multiperiod evolution of cooperation. Axelrod demonstrated that TFT strategies could only support a joint cooperation equilibrium if the following inequalities were met: δ > (T-R)/(T-P), δ > (T-R)/(R-S). Capture can also affect the evolution of cooperation by affecting these inequalities. By decreasing the temptation payoff (T′ < T) and increasing the sucker payoff (S′ > S), capture may change the range of δ for which joint cooperation is stable. These inequalities imply critical lower-bound values of δ below which cooperation cannot evolve. As before, reducing the temptation payoff facilitates cooperation, and increasing the sucker payoff restricts the opportunities for cooperation. In the multiperiod setting, decreasing the temptation loosens the first inequality so that at the margin certain discount rates that would not support a joint cooperation equilibrium without capture may be sufficiently small once capture has reduced the temptation payoff. Analogously, the second inequality is loosened by keeping captured S low by social disapproval of regulators who succumb to zero-sum capture. We can thus see a second way that social disapproval reductions to T and S can foster joint cooperation: by extending the range of discount rates where joint cooperation will remain stable in multiperiod games. Axelrod's dual prerequisites for the evolution of cooperation correspond to the “two-sided” nature of the traditional prisoner's dilemma. If the regulatory game, however, more closely represents the “single-sided” prisoner's dilemma game (discussed above in note 38), then the regulatory players will only need to overcome the first inequality. Accordingly, the evolution of cooperation will be easier to establish in single-sided prisoner dilemma games because the players need to deter only one path to joint defection (firm defection/agency retaliation). Efficient capture will also be much easier to obtain in single period games. As long as a firm can gain a first-mover advantage via capture (see supra note 36), then it can choose the higher payoffs of joint cooperation without fear of agency defection.+(T-R)/(T-P),+δ+>+(T-R)/(R-S).+Capture+can+also+affect+the+evolution+of+cooperation+by+affecting+these+inequalities.+By+decreasing+the+temptation+payoff+(T′+<+T)+and+increasing+the+sucker+payoff+(S′+>+S),+capture+may+change+the+range+of+δ+for+which+joint+cooperation+is+stable.+These+inequalities+imply+critical+lower-bound+values+of+δ+below+which+cooperation+cannot+evolve.+As+before,+reducing+the+temptation+payoff+facilitates+cooperation,+and+increasing+the+sucker+payoff+restricts+the+opportunities+for+cooperation.+In+the+multiperiod+setting,+decreasing+the+temptation+loosens+the+first+inequality+so+that+at+the+margin+certain+discount+rates+that+would+not+support+a+joint+cooperation+equilibrium+without+capture+may+be+sufficiently+small+once+capture+has+reduced+the+temptation+payoff.+Analogously,+the+second+inequality+is+loosened+by+keeping+captured+S+low+by+social+disapproval+of+regulators+who+succumb+to+zero-sum+capture.+We+can+thus+see+a+second+way+that+social+disapproval+reductions+to+T+and+S+can+foster+joint+cooperation:+by+extending+the+range+of+discount+rates+where+joint+cooperation+will+remain+stable+in+multiperiod+games.+Axelrod's+dual+prerequisites+for+the+evolution+of+cooperation+correspond+to+the+“two-sided”+nature+of+the+traditional+prisoner's+dilemma.+If+the+regulatory+game,+however,+more+closely+represents+the+“single-sided”+prisoner's+dilemma+game+(discussed+above+in+note+38),+then+the+regulatory+players+will+only+need+to+overcome+the+first+inequality.+Accordingly,+the+evolution+of+cooperation+will+be+easier+to+establish+in+single-sided+prisoner+dilemma+games+because+the+players+need+to+deter+only+one+path+to+joint+defection+(firm+defection/agency+retaliation).+Efficient+capture+will+also+be+much+easier+to+obtain+in+single+period+games.+As+long+as+a+firm+can+gain+a+first-mover+advantage+via+capture+(see+supra+note+36),+then+it+can+choose+the+higher+payoffs+of+joint+cooperation+without+fear+of+agency+defection.>Google Scholar

50 Although reducing the agency's temptation payoff (T′ R) can deter agency defection from joint cooperation, joint cooperation will only be an equilibrium if the firm itself is also deterred from defection. This will often be the case because while the agency may be deterred from defection, it will still retaliate if the firm defects. In these situations, the firm is left only with the choice of joint cooperation or joint defection–and clearly prefers the former. In other instances, the process of capture will destroy both the agency's incentive to either defect (T′ R) or retaliate (S′ P). In these circumstances, capture will not facilitate joint cooperation, as the firm will simply choose to defect. The circumstances under which this will occur are displayed below in fig. 3.Google Scholar

51 Bardach & Kagan, Going by the Book (cited in note 11).Google Scholar

52 See our discussion of discount rates above in notes 39 and 49.Google Scholar

53 It is interesting that we usually do not think about the possibility of reverse capture—that of the agency capturing the firm to increase the agency payoffs. Analytically both firms and agencies are controlled by managers who are agents for unconcentrated and rationally ignorant principals. Reverse capture would take three analogous forms–e.g., reverse zero-sum capture would lead to a firm cooperate/agency defect equilibrium–in which the agency defects to strict rule enforcement without retaliation from the firm. This conspicuously unanalyzed possibility of reverse capture is especially surprising since in other contexts, such as takeovers, policymakers can easily conceive of managers taking actions that deviate from shareholders' interests. Possibly agencies' moral exhortations to corporate managers are a subtle way of convincing the board that conversely what is good for America is good for General Motors.Google Scholar

54 See, e.g., more than 30 studies cited by Keith Hawkins, Environment and Enforcement Regulation and the Social Definition of Pollution 3 (Oxford: Clarendon Press, 1984). A third of the 96 Australian regulatory agencies studied by Grabosky and Braithwaite had not instituted a prosecution in three years. Even for the most punitive of regulatory agencies, the overwhelming majority of detected violations are not dealt with by punishment. Moreover, the attitudinal evidence of an ideological predisposition to cooperation is overwhelming. Grabosky & Braithwaite, of Manners Gentle 192–93 (cited in note 3).Google Scholar

55 The issue is whether agencies' current attitude against defecting to the temptation payoff is the by-product of firm lobbying.Google Scholar

56 The issue here is whether the uncaptured equilibrium would be one of joint cooperation (as implied by inefficient capture) or joint defection (as implied by zero-sum capture).Google Scholar

57 On the other hand, it must be said that because T—R is greater than T—P, the incentives for this first form of capture, inefficient capture, are less than the incentives for zero-sum capture. However, the base of cases of joint defection from which the stronger incentives for zero-sum capture can operate is so small that it is implausible that zero-sum capture could ever become more widespread than inefficient capture.Google Scholar

58 Scholz, 18 Law & Soc'y Rev. (cited in note 4); Axelrod, Evolution of Cooperation (cited in note 5).Google Scholar

59 Grabosky & Braithwaite, Of Manners Gentle.Google Scholar

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61 Scholz, John T., “Cooperative Regulatory Enforcement and the Politics of Administrative Effectiveness,” 85 Am. Pol. Sci. Rev. 115 (1991).CrossRefGoogle Scholar

62 Id.Google Scholar

63 Samuel Bowles & Herbert Gintis, Democracy and Capitalism (New York: Basic Books, 1986); Amitai Etzioni, The Moral Dimension: Toward a New Economics (New York: Free Press, 1988).Google Scholar

64 Harris & Milkis, Politics of Regulatory Change (cited in note 22); see also Quirk, Industry Influence (cited in note 2).Google Scholar

65 J. M. Edelman, The Symbolic Uses of Politics (Urbana: University of Illinois Press, 1964) (“Edelman, Symbolic Uses of Politics”).Google Scholar

66 Id.Google Scholar

67 Joel Rogers has argued that in a world where people have some basic democratic rights but little other power, they may use those rights in destructive ways. Joel Rogers,” The Limits of Legal Liberalism: Implementation and Empowerment in Administrative Regulation” (presented to Law & Society Association Annual Meeting, Madison, Wis., 1989). The conservative response to this destructiveness is to urge reductions in the political resources of less powerful groups. Rogers contends, in contrast, that increasing their political resources is at least as plausible a strategy for dealing with these problems. Instead of seeing adversarial NGO zealotry that reduces social product as a sign of their “excessive” strength, Rogers sees it as “a sign of weakness, testimony to the lack of alternative sanctions available to those who would curb the arbitrary exercise of power (people stand on their rights because they have nothing else to stand on).”Id. at 3. When organizations have a solid political foundation from which to extract long-term benefits, they are more likely to show the restraint that eschews short-term punch-and-grab strategies that undermine the prospects for long-term cooperative benefits. Weak NGOs, in contrast,” have every incentive to free-ride on their future interests, since they may not have a future.” Joel Rogers,” Divide and Conquer: Further ‘Reflections on the Distinctive Character of American Labor Laws,’” 1990 Wis. L. Rev. 1, 5 (1990).Google Scholar

68 Four years of observation by one of the authors of the ACTU leadership dealing with the leadership of the business community and the Australian government around the table of the Economic Planning Advisory Council leaves little doubt about this, at least for the present ACTU leadership.Google Scholar

69 See also Boyer, Barry & Meidinger, Errol, “Privatizing Regulatory Enforcement: A Preliminary Analysis of Citizen Suits under the Federal Environmental Laws,” 34 Buff. L. Rev. 833, 962 (1985).Google Scholar

70 Bendar presents a lucid account of how incomplete information (about whether defection has occurred) can undermine TFT strategies and the evolution of cooperation in a two-person prisoner's dilemma. Bendar, Jonathan, “In Good Times and Bad: Reciprocity in an Uncertain World,” 31 Am. J. Pol. Sci. 531 (1987).CrossRefGoogle Scholar

71 This way of describing litigation regularly recurs in Braithwaite's field notes of interviews with regulators.Google Scholar

72 Ably described by Shapiro, Who Guards? (cited in note 15), and R. Shep Melnick, Regulation and the Courts: The Case of the Clean Air Act (Washington D.C.: Brookings Institution, 1983) (“Melnick, Regulation”).Google Scholar

73 Shapiro, Who Guards? 152.Google Scholar

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75 However, litigation to change the law may be more cost effective for the NGO than either front-end or back-end Participation in enforcing the law as it exists. Nevertheless, we then need to consider whether front-end tripartite participation in writing the law is more cost effective for the NGO than waiting for back-end litigation to change the law.Google Scholar

76 Fuller, Lon, “The Forms and Limits of Adjudication,” 92 Harv. L. Rev. 394 (1978).Google Scholar

77 Scholz, 18 Law & Soc'y Rev. (cited in note 5).Google Scholar

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79 Of 358 directors of nursing of Australian nursing homes, 42% agreed with the statement,” My proprietor has the attitude that the government's standards and regulations must be met no matter what the costs.” John Braithwaite, Toni Makkai, Valerie Braithwaite, Diane Gibson, & David Ermann, The Contribution of the Standards Monitoring Process to the Quality of Nursing Home Life: A Preliminary Report (Canberra: Department of Community Services and Health, 1990).Google Scholar

80 Peter Yeager,” Realms of Reason: Notes on the Division of Moral Labor in Corporate Behavior” (presented to Edwin Sutherland Conference on White-Collar Crime, Indiana University, 1990).Google Scholar

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82 Joshua Cohen & Joel Rogers, On Democracy: Toward a Transformation of American Society 51–58 (Harmondsworth: Penguin, 1983).Google Scholar

83 Business executives are often captured by regulators for the same reason. To avoid the angst of a confrontation, they may prefer to comply with what they perceive as an unreasonable regulatory demand.Google Scholar

84 See, e.g., Robert A. Kagan, Regulatory Justice: Implementing a Wage-Price Freeze (New York: Russell Sage Foundation, 1978).Google Scholar

85 Robert A. Kagan & John T. Scholz,” The Criminology of the Corporation and Regulatory Enforcement Strategies,”in K. Hawkins & J. Thomas, eds., Enforcing Regulation (Boston: Kluwer-Nijhoff, 1984) (“Kagan & Scholz, ‘Criminology of the Corporation’”).CrossRefGoogle Scholar

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88 Thomas C. Schelling,” Command and Control,” in J. W. McKie, ed., Social Responsibility and the Business Predicament (Washington D.C.: Brookings Institution, 1974).Google Scholar

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90 Marver H. Bernstein, Regulating Business by Independent Commission (Princeton, N.J.: Princeton University Press, 1955); Gabriel Kolko, Railroads and Regulation, 1877–1916 (Princeton, N.J.: Princeton University Press, 1965).Google Scholar

91 This, of course, is an idealization because regulatory laws will often be a product of logrolling and placating special interests.Google Scholar

92 An alternative model here is that regulatory laws are usually set at a standard that everyone, including regulators, understands is too high. Agencies seek that level below the standard in the law that the state accepts as normally appropriate. Then the model unfolds in the same way: the industry bargains for less than this, the NGO for more, so that with the NGO playing the game, the result is more likely near the standard the state accepts as appropriate. Similarly in those situations where the law has lagged behind technological change and the state seeks a standard higher than that embodied in the law, NGO participation will bring the final result closer to that preferred state standard.Google Scholar

93 Nancy Frank,” Risk and Distributive Justice” (presented to Edwin Sutherland Conference on White-collar Crime, Indiana University, 1990).Google Scholar

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99 If distrust breaks out, the players will lose the power to decide outcomes to other institutions (like courts of law) and to environmental contingencies that determine who will win out in a test of strength (like fluctuating market conditions which might decide how long the firm or the union can hold out during a strike). To put it another way, under conditions of trust, intentions of the players determine more of the variance in outcomes; under conditions of distrust, outcomes are more in the hands of uncontrolled external contingencies.Google Scholar

100 John Braithwaite,” Getting on with the Job of Understanding Organizational Deviance” (presented to Workshop on Organizational Deviance, Harvard Business School, March 9, 1989).Google Scholar

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103 Wolfgang Streeck & Phillipe Schmitter,” Community, Market, State and Associations? The Prospective Contribution of Interest Governance to Social Order,”in W. Streek & P. Schmitter, eds., Private Interest Government 22–23 (Beverly Hills, Cal.: Sage Publications, 1985).Google Scholar

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106 Scholz, 18 Law & Soc'y Rev. (cited in note 5).Google Scholar

107 I. William Zartman & Maureen R. Berman, The Practical Negotiator (New Haven, Conn.: Yale University Press, 1982).Google Scholar

108 Edward de Bono, Conflicts: A Better Way to Resolve Them (London: Harrays, 1985).Google Scholar

109 Rees, Reforming the Workplace (cited in note 60).Google Scholar

110 Id. at 138.Google Scholar

111 Id. at 155.Google Scholar

112 Id. at 157–58.Google Scholar

113 Carson & Henenberg, 16 Soc. Just. (cited in note 60).Google Scholar

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115 See also Charles Noble, Liberalism at Work: The Rise and Full of OSHA (Philadelphia: Temple University Press, 1986).Google Scholar

116 This policy choice is similar to the “Battle of the Sexes” game, a conflict between a man who wants to go to the ballet and a woman who wants to go to a prizefight. While selfish, they are deeply in love and also prefer to be together (Rasmusen, Games 34 (cited in note 38)). The payoffs for such a conflict could be rewritten in terms of the policy conflict: NGO AB WX CD(2,1) (-5,-5) FIRM_YZ (-1,-1) (1,2) Payoffs to (NGO, FIRM) The compromise policy choice of ABYZ corresponds to the negative “off-diagonal” payoffs of uncoordinated attendance. Unlike the prisoner's dilemma, there is no dominant equilibrium for the Battle of the Sexes game. Instead, our argument is that tripartism could improve prospects that a coordinated equilibrium will be reached. Tripartism, indeed, might be able to increase the possibility that the NGO's preference is followed. The multiplicity of NGOs might in some contexts constitute a type of precommittment for their preferred strategy. In the Battle of the Sexes, if one party can precommit to picking a certain strategy, the other player will predictably acquiesce. We will not press this line too far, however, because there is a third player involved—the state, which will ultimately decide whether to reject ABYZ.Google Scholar

117 Joel F. Handler, Social Movements and the Legal System: A Theory of Law Reform and Social Change (Philadelphia: University of Pennsylvania Press, 1990) (“Handler, Social Movements”).Google Scholar

118 Meidinger,” Regulatory Culture” 25 (cited in note 26).Google Scholar

119 Id. at 20.Google Scholar

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124 The resolution to this problem can only be of an institutionally contingent form. We do not see any easy general theoretical resolution. However, one of the authors has certainly participated in Australian regulatory cultures where the problem is solved fairly well by an appropriate mix of opportunities for key players to meet both collectively and in pairs. Indeed many university departments solve this problem pretty well: there are some issues where constructive communication will best be advanced at a full faculty meeting, others where it is better for smaller working groups to meet, others where it is best for the chairperson to communicate individually with all faculty members. So long as the agreements that are the product of a sequence of private discussions are ultimately brought up in a way that gives all parties an opportunity for open communication about them, tripartite process can be constructively advanced by confidential caucusing; see generally Johan P. Olson,” Integrated Organizational Participation in Government” in P.C. Nystrom & W.H. Starbuck, eds., 2 Handbook of Organizational Design (Oxford: Oxford University Press, 1981).Google Scholar

125 Edward H. Lorenz,” Neither Friends nor Strangers: Informal Networks of Sub-contracting in French Industry.” in D. Gambetta, ed., Trust: Making and Breaking Cooperative Relations 209 (Oxford: Blackwell, 1988).Google Scholar

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128 Scholars of a rational choice bent sometimes persist in a disinclination to accept that trust is a precondition for their explanations based on economic interests. Speaking of economic reform, Elster and Moene say this of trust: Indeed, some amount of trust must be present in any complex economic system, and it is far from inconceivable that systems with a higher level of general trust could come about. It would be risky, however, to make higher levels of trust into a cornerstone of economic reform. We may hope that trust will come about as the by-product of a good economic system (and thus make the system even better), but one would be putting the cart before the horse were one to bank on trust, solidarity and altruism as the preconditions for reform. Jon Elster & K. Moene, eds., Alternatives to Capitalism (Cambridge: Cambridge University Press, 1988). But what reform could there be of the securities market, arguably the central institution of a capitalist economy, for which trust was not a precondition? How could a securities market, or its replacement, work efficiently when distrust meant that trades could not be agreed, could not affect prices, until contracts were signed by vendor and purchaser? The very etymology of “security” is grounded in the discourse of trust and confidence; in the Oxford English Dictionary, a security is a “pledge for the fulfilment of undertaking.” Trust is constitutive of a good economic system and a good economic system is constitutive of trust. Sound institutional design is impossible without taking both economic incentives and trust seriously as preconditions for success.Google Scholar

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137 The idea of tripartism can be applied along with other forms of regulatory delegation. NGOs can be involved in self-regulatory enforcement, enforced self-regulation as well as with more escalating forms of traditional government regulation—what we term the enforcement pyramid. Ayres & Braithwaite, Responsive Regulation (cited in note 25). Indeed NGO involvement can strengthen the acceptability of deregulatory shifts by injecting public accountability and resistance to supine enforcement under the softer options. NGO involvement can also provide the data on noncompliance that justifies escalation of state regulatory intervention. In these senses, the ideas of tripartism and the enforcement pyramid are complementary ways of transcending the regulation versus deregulation debate.Google Scholar

138 Ross Cheit,” Administrative Procedures and Private Regulation” (presented to Annual Meeting of Law & Society Association, Washington, D.C., 1987).Google Scholar

139 Ayres & Braithwaite, Responsive Regulation ch. 2.Google Scholar

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147 Joel F. Handler,” Community Care for the Frail Elderly: A Theory of Empowerment” 5 (unpublished, 1989).Google Scholar

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149 Together with Valerie Braithwaite, Diane Gibson, David Ermann, and Toni Makkai.Google Scholar

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