1. “New Learning” Barnard’s Inn Hall Holborn London EC1N 2HH Tel: +44 (0)20 7831-0575 Fax: +44 (0)20 7831-5208 Email : michael_mainelli@zyen.com www.gresham.ac.uk © Gresham College 2006 Mercers’ School Memorial Professor of Commerce Michael Mainelli Standards Markets: The Free Market Response To Regulation?

2. www.gresham.ac.uk © Gresham College 2006 Outline Standard gauge? Standards, standards everywhere… Appellation d'Origine Contrôlée Reinheitsgebot Trade relevance competence independence competition innovation Confidence & trust “Get a detailed grip on the big picture.” Chao Kli Ning

3. www.gresham.ac.uk © Gresham College 2006 37th World Standards Day

4. www.gresham.ac.uk © Gresham College 2006 Standard Gauge?

5. www.gresham.ac.uk © Gresham College 2006 The Progress of History

6. www.gresham.ac.uk © Gresham College 2006 Standards, Standards, Everywhere … And Not a Stop to Think? Financial

7. www.gresham.ac.uk © Gresham College 2006 Standards, Standards, Everywhere … And Not a Stop to Think? Financial Scientific

8. www.gresham.ac.uk © Gresham College 2006 Standards, Standards, Everywhere … And Not a Stop to Think? Financial Scientific Conformance

9. www.gresham.ac.uk © Gresham College 2006 Standards, Standards, Everywhere … And Not a Stop to Think? Financial Scientific Conformance Health & Safety

10. www.gresham.ac.uk © Gresham College 2006 Standards, Standards, Everywhere … And Not a Stop to Think? Financial Scientific Conformance Health & Safety Communications & Information Technology

11. www.gresham.ac.uk © Gresham College 2006 Standards, Standards, Everywhere … And Not a Stop to Think? Financial Scientific Conformance Health & Safety Communications & Information Technology Management, Processes & Quality

12. www.gresham.ac.uk © Gresham College 2006 Financial Scientific Conformance Health & Safety Communications & Information Technology Management, Processes & Quality Environmental, Social And Ethical Standards, Standards, Everywhere … And Not a Stop to Think?

13. www.gresham.ac.uk © Gresham College 2006 Commerce Needs Standards BuyerSupplier Goods Consideration

14. www.gresham.ac.uk © Gresham College 2006 Trusted Third Party Trusted Third Party BuyerSupplier Goods Fairness Objectivity Consideration

15. www.gresham.ac.uk © Gresham College 2006 Benefits? CategoryPositive Effects Negative Effects Necessity for standard to be public? Compatibility (or interface) network externalities monopoly or security monopolisation if not public Minimum quality (or quality discrimination) correction for Gresham’s law; reduced transaction costs regulatory capture; “raising rival’s costs” essentially a public or co- operative activity Variety reduction economies of scale; building focus and critical mass reduced choicenot necessary Information standards (or measurement compatibility) facilitates trade; reduced transaction costs regulatory capture essentially a public or co- operative activity (adapted from Swann 2000, page 8)

16. www.gresham.ac.uk © Gresham College 2006 Appellation d'Origine Contrôlée

17. www.gresham.ac.uk © Gresham College 2006 Governance Monitoring Feed-forward Feed-back Process Output Input A Standard System?

18. www.gresham.ac.uk © Gresham College 2006 A Load Of Old Goats’ …?

19. www.gresham.ac.uk © Gresham College 2006 Frequency of Transaction Importance of Transaction Brand Standard Brands Joint Brand Product or Service Conformance Assessment Certified Process Custom Product or Service

20. www.gresham.ac.uk © Gresham College 2006 Reinheitsgebot

21. www.gresham.ac.uk © Gresham College 2006 Brands

22. www.gresham.ac.uk © Gresham College 2006 Trade Facilitator or Barrier? Relevance Competence Independence Competition Innovation

23. www.gresham.ac.uk © Gresham College 2006 Competence Quis Aestimat Ipsos Aestimatores? BuyerSupplier Goods Consideration Trusted Third Party Fairness Objectivity Trusted Third Party Fairness Objectivity Trusted Third Party Fairness Objectivity Trusted Third Party Fairness Objectivity Trusted Third Party Fairness Objectivity Trusted Third Party Fairness Objectivity

24. www.gresham.ac.uk © Gresham College 2006 Independence Accreditation versus Certification

25. www.gresham.ac.uk © Gresham College 2006 Competition From Closed To Open Proprietary Free Few Many

26. www.gresham.ac.uk © Gresham College 2006 Innovation Risk/Reward Volatility Reduction Reward Enhancement Risk Avoidance ‘Margin’ ‘Stability’ ‘Flexibility’ Sustainability

27. www.gresham.ac.uk © Gresham College 2006 Confidence & Trust

28. www.gresham.ac.uk © Gresham College 2006 Discussion 1. Is standards evolution an oxymoron? 2. Is a monopoly for accreditation sensible? “Get a big picture grip on the details.” Chao Kli Ning

29. www.gresham.ac.uk © Gresham College 2006 Standards Markets: The Free Market Response To Regulation? Thank you!

30. www.gresham.ac.uk © Gresham College 2006