Environmental standard

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Environmental_standard 

Environmental standards are administrative regulations or civil law rules implemented for the treatment and maintenance of the environment. Environmental standards are typically set by government and can include prohibition of specific activities, mandating the frequency and methods of monitoring, and requiring permits for the use of land or water. Standards differ depending on the type of environmental activity.

Environmental standards may be used produce quantifiable and enforceable laws that promote environmental protection. The basis for the standards is determined by scientific opinions from varying disciplines, the views of the general population, and social context. As a result, the process of determining and implementing the standards is complex and is usually set within legal, administrative or private contexts.

The human environment is distinct from the natural environment. The concept of the human environment considers that humans are permanently interlinked with their surroundings, which are not just the natural elements (air, water, and soil), but also culture, communication, co-operation, and institutions. Environmental standards should preserve nature and the environment, protect against damage, and repair past damage caused by human activity.

Development of environmental standards

Historically, the development of environmental standards was influenced by two competing ideologies: ecocentrism and anthropocentrism. Ecocentrism frames the environment as having an intrinsic value divorced from the human utility, while anthropocentrism frames the environment as only having value if it helps humanity survive. This has led to problems in establishing standards.

In recent decades, the popularity and awareness of environmentalism has increased with the threat of global warming becoming more alarming than ever since the IPCC released their report in 2018. The report asserts that based on scientific evidence “if human activities continue to at this rate it is predicted to increase in-between 1.5-2 °C over pre industrial levels in-between 2030 and 2052”. Busby argues that Climate change will define this century and that it is no longer a faraway threat. In turn, the demand for protecting the environment has risen. Developments in science have been fundamental for the setting of environmental standards. Improved measurements and techniques have allowed scientists to better understand the impact of human-caused environmental damage on human health and the biodiversity which composes the natural environment.

Therefore, environmental standards in modern times are set with the view that humans do have obligations toward the environment, but they can be justified in terms of obligations toward other humans. This means it is possible to value the environment without discarding anthropocentrism. Sometimes called prudential or enlightened anthropocentrism. This is evident as environmental standards often characterize the desired state (e.g. the pH of a lake should be between 6.5 and 7.5) or limit alterations (e.g., no more than 50% of the natural forest may be damaged). Statistical methods are used to determine the specific states and limits the enforceable environmental standard.

Penalties and other procedures for dealing with regions out of compliance with the standard may be part of the legislation.

Governmental institutions setting environmental standards

Environmental standards are set by many different institutions.

United Nations (UN)

The UN, with 193 member states, is the largest intergovernmental organization. The environmental policy of the UN has a huge impact on the setting of international environmental standards. At the Earth summit in 1992, held in Rio, the member states acknowledged their negative impact on the environment for the first time. During this and the following Millennium Declaration, the first development goals for environmental issues were set.

Since then, the risk of the catastrophe caused by extreme weather has been enhanced by the overuse of natural resources and global warming. At the Paris Agreement in 2015, the UN determined 17 Goals for sustainable development. Besides the fight against global poverty, the main focus of the goals is the preservation of our planet. These goals set a baseline for global environmentalism. The environmental areas of water, energy, oceans, ecosystems, sustainable production, consumer behavior and climate protection were covered by the goals. The goals contained explanations on which mediums were required to reach them. Implementation and follow-up are controlled by non-enforceable voluntary national reviews. The main control is done by statistical values, which are called indicators. These indicators deliver information if the goals are reached.

European Union

(See also: Environmental policy of the European Union)

Within the Treaty on the Functioning of the European Union, the Union integrates a self-commitment towards the environment. In Title XX, Article 191.1, it is settled: “Union policy on the environment shall contribute to the pursuit of the following objectives: — preserving, protecting and improving the quality of the environment, — protecting human health, — prudent and rational utilization of natural resources, — promoting measures at international level to deal with regional or worldwide environmental; problems, and in particular combating climate change.” All environmental actions are based on this article and lead to a suite of environmental laws. European environmental regulation covers air, biotechnological, chemical, climate change, environmental economics, health, industry and technology, land use, nature and biodiversity, noise, protection of the ozone layer, soil, sustainable development, waste, and water.

The European Environment Agency (EEA) consults the member states about environmental issues, including standards.

The environmental standards set by European legislation include precise parametric concentrations of pollutants and also includes target environmental concentrations to be achieved by specific dates.

United States

In the United States, the development of standards is decentralized. These standards were developed by more than a hundred different institutions, many of which are private. The method of handling environmental standards is a partly fragmented plural system, which is mainly affected by the market. Under the Trump Administration, Climate standards have increasingly become a site of conflict in the politics of global warming.

Ambient air quality standards

The National Ambient Air Quality Standards (NAAQS) are set by the Environmental Protection Agency (EPA) to regulate pollutants in the air. The enforcement of these standards is designed to prevent further degradation of air quality.

States may set their own ambient standards, so long as they are lower than the national standard. The NAAQS regulates the six criteria for air pollutants: sulfur dioxide (SO₂), particulate matter (PM₁₀), carbon monoxide (CO), ozone (O₃), nitrogen dioxide (NO₂), and lead (Pb). To ensure that the ambient standards are met, the EPA uses the Federal Reference Method (FRM) and Federal Equivalent Method (FEM) systems to measure the number of pollutants in the air and check that they are within the legal limits.

Air emission standards

Emission standards are national regulations managed by the EPA  that control the amount and concentration of pollutants that can be released into the atmosphere to maintain air quality, human health, and regulate the release of greenhouse gases such as carbon dioxide (CO₂), oxides of nitrogen and oxides of sulfur.

The standards are established in two phases to stay up-to-date, with final projections aiming to collectively save Americans $1.7 trillion in fuel costs and reduce the amount of greenhouse gas emissions (GHG) by 6 billion metric tons. Similar to the ambient standards, individuals states may also tighten regulations. For example, California set their own emissions standards through the California Air Resources Board (CARB), and these standards have been adopted by some other states. Emission standards also regulate the number of pollutants released by heavy industry and for electricity.

The technological standards set by the EPA do not necessarily enforce the use of specific technologies, but set minimum performance levels for different industries. The EPA often encourages technological improvement by setting standards that are not achievable with current technologies. These standards are always set based on the industry's top performers to promote the overall improvement of the industry as a whole.

Impact of non-governmental organizations on environmental standards

International Organization of Standardization

The International Organization of Standardization (ISO) develops a large number of voluntary standards. With 163 member states, it has a comprehensive outreach. The standards set by the ISO were often transmitted into national standards by different nations. About 363,000 companies and organizations worldwide have the ISO 14001 certificate, a standard for environmental management created to improve the environmental performance of an organization and legal aspects as well as reaching environmental aims. Most of the national and international environmental management standards include the ISO 14000 series. In light of the UN Sustainable Development Goals, ISO has identified several families of standards which help meet SDG 13 which is focused on Climate Action for global warming.

Greenpeace

Greenpeace is a popular non-governmental organization that deals with biodiversity and the environment. Their activities have had a great global impact on environmental issues. Greenpeace encourages public attention and enforces governments or companies to adapt and set environmental standards through activities recording special environmental issues. Their main focus is on forests, the sea, climate change, and toxic chemicals. For example, the organization set a standard about toxic chemicals together with the textiles sector, creating the concept 2020, which plans to banish all toxic chemicals from textile production by 2020.

World Wildlife Fund

The World Wide Fund is an international non-governmental organization founded in 1961 that works in the field of wilderness preservation and the reduction of human impact on the environment.

Economy

Environmental standards in the economy are set through external motivation. First, companies need to fulfill the environmental law of the countries in which they operate. Moreover, environmental standards are based on voluntary self-commitment which means companies implement standards for their business. These standards should exceed the level of the requirements of governmental regulations. If companies set further-reaching standards, they try to fulfill the wishes of stakeholders.

At the process of setting environmental standards, three different stakeholders have the main influence. The first stakeholder, the government, is the strongest determinate, followed by the influence of the customers. Nowadays, there is an increasing number of people, who consider environmental factors during their purchasing decision. The third stakeholder who forces companies to set environmental standards is industrial participants. If companies are part of industrial networks, they are forced to fulfill the codes of conduct of these networks. This code of conduct is often set to improve the collective reputation of an industry. Another driving force of industry participants could be a reaction to a competitors action.

The environmental standards set by companies themselves can be divided into two dimensions: operational environmental policies and the message sent in advertising and public communications.

Operational environmental policies

This can be the environmental management, audits, controls, or technologies. In this dimension, the regulations tend to be closely connected with other function areas, e.g. lean production. Furthermore, it could be understood that multinational companies tend to set cross-country harmonized environmental government regulations and therefore reach a higher performance level of environmental standards.

It is often argued that companies focus on the second dimension: the message sent in advertising and public communications. To satisfy the stakeholders' requirement, companies were focused on the public impression of their environmental self-commitment standards. Often the real implementation does not play an important role.

A lot of companies settle the responsibility for the implementation of low-budget departments. The workers, who were in charge of the standards missing time and financial resources to guarantee a real implementation. Furthermore, within the implementation, goal conflicts arise. The biggest concern of companies is that environmental protection is more expansive compared to the gained beneficial effects. But, there are a lot of positive cost-benefit-calculation for environmental standards set by companies themselves. It is observed that companies often set environmental standards after a public crisis. Sometimes environmental standards were already set by companies to avoid public crises. As to whether environmental self-commitment standards are effective, is controversial.

Standardization

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Standardization

Standardization or standardisation is the process of implementing and developing technical standards based on the consensus of different parties that include firms, users, interest groups, standards organizations and governments. Standardization can help maximize compatibility, interoperability, safety, repeatability, or quality. It can also facilitate a normalization of formerly custom processes. In social sciences, including economics, the idea of standardization is close to the solution for a coordination problem, a situation in which all parties can realize mutual gains, but only by making mutually consistent decisions.

History

Early examples

Standard weights and measures were developed by the Indus Valley civilization. The centralized weight and measure system served the commercial interest of Indus merchants as smaller weight measures were used to measure luxury goods while larger weights were employed for buying bulkier items, such as food grains etc. Weights existed in multiples of a standard weight and in categories. Technical standardisation enabled gauging devices to be effectively used in angular measurement and measurement for construction. Uniform units of length were used in the planning of towns such as Lothal, Surkotada, Kalibangan, Dolavira, Harappa, and Mohenjo-daro. The weights and measures of the Indus civilization also reached Persia and Central Asia, where they were further modified. Shigeo Iwata describes the excavated weights unearthed from the Indus civilization:

A total of 558 weights were excavated from Mohenjodaro, Harappa, and Chanhu-daro, not including defective weights. They did not find statistically significant differences between weights that were excavated from five different layers, each measuring about 1.5 m in depth. This was evidence that strong control existed for at least a 500-year period. The 13.7-g weight seems to be one of the units used in the Indus valley. The notation was based on the binary and decimal systems. 83% of the weights which were excavated from the above three cities were cubic, and 68% were made of chert.

18th century attempts

Henry Maudslay's famous early screw-cutting lathes of circa 1797 and 1800.

The implementation of standards in industry and commerce became highly important with the onset of the Industrial Revolution and the need for high-precision machine tools and interchangeable parts.

Henry Maudslay developed the first industrially practical screw-cutting lathe in 1800. This allowed for the standardization of screw thread sizes for the first time and paved the way for the practical application of interchangeability (an idea that was already taking hold) to nuts and bolts.

Before this, screw threads were usually made by chipping and filing (that is, with skilled freehand use of chisels and files). Nuts were rare; metal screws, when made at all, were usually for use in wood. Metal bolts passing through wood framing to a metal fastening on the other side were usually fastened in non-threaded ways (such as clinching or upsetting against a washer). Maudslay standardized the screw threads used in his workshop and produced sets of taps and dies that would make nuts and bolts consistently to those standards, so that any bolt of the appropriate size would fit any nut of the same size. This was a major advance in workshop technology.

National standard

Maudslay's work, as well as the contributions of other engineers, accomplished a modest amount of industry standardization; some companies' in-house standards spread a bit within their industries.

Graphic representation of formulae for the pitches of threads of screw bolts

Joseph Whitworth's screw thread measurements were adopted as the first (unofficial) national standard by companies around the country in 1841. It came to be known as the British Standard Whitworth, and was widely adopted in other countries.

This new standard specified a 55° thread angle and a thread depth of 0.640327p and a radius of 0.137329p, where p is the pitch. The thread pitch increased with diameter in steps specified on a chart. An example of the use of the Whitworth thread is the Royal Navy's Crimean War gunboats. These were the first instance of "mass-production" techniques being applied to marine engineering.

With the adoption of BSW by British railway lines, many of which had previously used their own standard both for threads and for bolt head and nut profiles, and improving manufacturing techniques, it came to dominate British manufacturing.

American Unified Coarse was originally based on almost the same imperial fractions. The Unified thread angle is 60° and has flattened crests (Whitworth crests are rounded). Thread pitch is the same in both systems except that the thread pitch for the 1⁄2 in. (inch) bolt is 12 threads per inch (tpi) in BSW versus 13 tpi in the UNC.

National standards body

By the end of the 19th century, differences in standards between companies, was making trade increasingly difficult and strained. For instance, an iron and steel dealer recorded his displeasure in The Times: "Architects and engineers generally specify such unnecessarily diverse types of sectional material or given work that anything like economical and continuous manufacture becomes impossible. In this country no two professional men are agreed upon the size and weight of a girder to employ for given work."

The Engineering Standards Committee was established in London in 1901 as the world's first national standards body. It subsequently extended its standardization work and became the British Engineering Standards Association in 1918, adopting the name British Standards Institution in 1931 after receiving its Royal Charter in 1929. The national standards were adopted universally throughout the country, and enabled the markets to act more rationally and efficiently, with an increased level of cooperation.

After the First World War, similar national bodies were established in other countries. The Deutsches Institut für Normung was set up in Germany in 1917, followed by its counterparts, the American National Standard Institute and the French Commission Permanente de Standardisation, both in 1918.

Regional standards organization

At a regional level (e.g. Europa, the Americas, Africa, etc) or at subregional level (e.g. Mercosur, Andean Community, South East Asia, South East Africa, etc), several Regional Standardization Organizations exist (see also Standards Organization).

The three regional standards organizations in Europe - or European Standardization Organizations (ESOs) recognised by the EU Regulation on Standardization [Regulation (EU) 1025/2012] are CEN, CENELEC and ETSI. CEN develops standards for numerous kinds of products, materials, services and processes. Some sectors covered by CEN include transport equipment and services, chemicals, construction, consumer products, defence and security, energy, food and feed, health and safety, healthcare, digital sector, machinery or services. The European Committee for Electrotechnical Standardization (CENELEC) is the European Standardization organization developing standards in the electrotechnical area and corresponding to the International Electrotechnical Commission (IEC) in Europe.

International standards

Main article: International standard

The first modern International Organization (Intergovernmental Organization) the International Telegraph Union (now International Telecommunication Union) was created in 1865 to set international standards in order to connect national telegraph networks, as a merger of two predecessor organizations (Bern and Paris treaties) that had similar objectives, but in more limited territories. With the advent of radiocommunication soon after the creation, the work of the ITU quickly expanded from the standardization of Telegraph communications, to developing standards for telecommunications in general.

International Standards Associations

By the mid to late 19th century, efforts were being made to standardize electrical measurement. Lord Kelvin was an important figure in this process, introducing accurate methods and apparatus for measuring electricity. In 1857, he introduced a series of effective instruments, including the quadrant electrometer, which cover the entire field of electrostatic measurement. He invented the current balance, also known as the Kelvin balance or Ampere balance (SiC), for the precise specification of the ampere, the standard unit of electric current.

R. E. B. Crompton became concerned by the large range of different standards and systems used by electrical engineering companies and scientists in the early 20th century. Many companies had entered the market in the 1890s and all chose their own settings for voltage, frequency, current and even the symbols used on circuit diagrams. Adjacent buildings would have totally incompatible electrical systems simply because they had been fitted out by different companies. Crompton could see the lack of efficiency in this system and began to consider proposals for an international standard for electric engineering.

In 1904, Crompton represented Britain at the International Electrical Congress, held in connection with Louisiana Purchase Exposition in Saint Louis as part of a delegation by the Institute of Electrical Engineers. He presented a paper on standardisation, which was so well received that he was asked to look into the formation of a commission to oversee the process. By 1906 his work was complete and he drew up a permanent constitution for the International Electrotechnical Commission. The body held its first meeting that year in London, with representatives from 14 countries. In honour of his contribution to electrical standardisation, Lord Kelvin was elected as the body's first President.

Memorial plaque of founding ISA in Prague.

The International Federation of the National Standardizing Associations (ISA) was founded in 1926 with a broader remit to enhance international cooperation for all technical standards and specifications. The body was suspended in 1942 during World War II.

After the war, ISA was approached by the recently formed United Nations Standards Coordinating Committee (UNSCC) with a proposal to form a new global standards body. In October 1946, ISA and UNSCC delegates from 25 countries met in London and agreed to join forces to create the new International Organization for Standardization (ISO); the new organization officially began operations in February 1947.

In general, each country or economy has a single recognized National Standards Body (NSB). Examples include ABNT, AENOR (now called UNE, Spanish Association for Standardization), AFNOR, ANSI, BSI, DGN, DIN, IRAM, JISC, KATS, SABS, SAC, SCC, SIS. An NSB is likely the sole member from that economy in ISO.

NSBs may be either public or private sector organizations, or combinations of the two. For example, the three NSBs of Canada, Mexico and the United States are respectively the Standards Council of Canada (SCC), the General Bureau of Standards (Dirección General de Normas, DGN), and the American National Standards Institute (ANSI). SCC is a Canadian Crown Corporation, DGN is a governmental agency within the Mexican Ministry of Economy, and ANSI and AENOR are a 501(c)(3) non-profit organization with members from both the private and public sectors. The determinants of whether an NSB for a particular economy is a public or private sector body may include the historical and traditional roles that the private sector fills in public affairs in that economy or the development stage of that economy.

Usage

Standards can be:

• de facto standards which means they are followed by informal convention or dominant usage.
• de jure standards which are part of legally binding contracts, laws or regulations.
• Voluntary standards which are published and available for people to consider for use.

The existence of a published standard does not necessarily imply that it is useful or correct. Just because an item is stamped with a standard number does not, by itself, indicate that the item is fit for any particular use. The people who use the item or service (engineers, trade unions, etc.) or specify it (building codes, government, industry, etc.) have the responsibility to consider the available standards, specify the correct one, enforce compliance, and use the item correctly: validation and verification.

To avoid the proliferation of industry standards, also referred to as private standards, regulators in the United States are instructed by their government offices to adopt "voluntary consensus standards" before relying upon "industry standards" or developing "government standards".^[24] Regulatory authorities can reference voluntary consensus standards to translate internationally accepted criteria into public policy.

Information exchange

In the context of information exchange, standardization refers to the process of developing standards for specific business processes using specific formal languages. These standards are usually developed in voluntary consensus standards bodies such as the United Nations Center for Trade Facilitation and Electronic Business (UN/CEFACT), the World Wide Web Consortium (W3C), the Telecommunications Industry Association (TIA), and the Organization for the Advancement of Structured Information Standards (OASIS).

There are many specifications that govern the operation and interaction of devices and software on the Internet, but they are rarely referred to as standards, so as to preserve that word as the domain of relatively disinterested bodies such as ISO. The W3C, for example, publishes "Recommendations", and the IETF publishes "Requests for Comments" (RFCs). However, these publications are sometimes referred to as standards.

Environmental protection

See also: Import; Eco-tariff; Subsidy; Environmental impact assessment; § Ergonomics, workplace and health; and Air quality index

Standardized product certifications such as of organic food, buildings or possibly sustainable seafood as well as standardized product safety evaluation and dis/approval procedures (e.g. regulation of chemicals, cosmetics and food safety) can protect the environment. This effect may depend on associated modified consumer choices, strategic product support/obstruction, requirements and bans as well as their accordance with a scientific basis, the robustness and applicability of a scientific basis, whether adoption of the certifications is voluntary, and the socioeconomic context (systems of governance and the economy), with possibly most certifications being so far mostly largely ineffective.

Moreover, standardized scientific frameworks can enable evaluation of levels of environmental protection, such as of marine protected areas, and serve as, potentially evolving, guides for improving, planning and monitoring the protection-quality, -scopes and -extents.

Moreover, technical standards could decrease electronic waste and reduce resource-needs such as by thereby requiring (or enabling) products to be interoperable, compatible (with other products, infrastructures, environments, etc), durable, energy-efficient, modular, upgradeable/repairable and recyclable and conform to versatile, optimal standards and protocols.

Such standardization is not limited to the domain of electronic devices like smartphones and phone chargers but could also be applied to e.g. the energy infrastructure. Policy-makers could develop policies "fostering standard design and interfaces, and promoting the re-use of modules and components across plants to develop more sustainable energy infrastructure". Computers and the Internet are some of the tools that could be used to increase practicability and reduce suboptimal results, detrimental standards and bureaucracy, which is often associated with traditional processes and results of standardization. Taxes and subsidies, and funding of research and development could be used complementarily. Standardized measurement is used in monitoring, reporting and verification frameworks of environmental impacts, usually of companies, for example to prevent underreporting of greenhouse gas emissions by firms.

Product testing and analysis can also be done for, enable or aid environmental protection:

Product testing and analysis

Further information: Product information; Life-cycle assessment; § Ergonomics, workplace and health; and Advertising § Criticisms

In routine product testing and product analysis results can be reported using official or informal standards. It can be done to increase consumer protection, to ensure safety or healthiness or efficiency or performance or sustainability of products. It can be carried out by the manufacturer, an independent laboratory, a government agency, a magazine or others on a voluntary or commissioned/mandated basis.

Estimating the environmental impacts of food products in a standardized way – as has been done with a dataset of >57,000 food products in supermarkets – could e.g. be used to inform consumers or in policy. For example, such may be useful for approaches using personal carbon allowances (or similar quota) or for targeted alteration of (ultimate overall) costs.

Safety

Further information: Safety standards

See also: Workplace safety standards

Public information symbols

See also: ISO 7010

Public information symbols (e.g. hazard symbols), especially when related to safety, are often standardized, sometimes on the international level.

Biosafety

Further information: Biosafety

Standardization is also used to ensure safe design and operation of laboratories and similar potentially dangerous workplaces, e.g. to ensure biosafety levels. There is research into microbiology safety standards used in clinical and research laboratories.

Defense

In the context of defense, standardization has been defined by NATO as The development and implementation of concepts, doctrines, procedures and designs to achieve and maintain the required levels of compatibility, interchangeability or commonality in the operational, procedural, material, technical and administrative fields to attain interoperability.

Ergonomics, workplace and health

See also: Nutrient profiling, Cosmetics § Safety, Regulation of chemicals § Issues, Consumer protection, and Living standard

In some cases, standards are being used in the design and operation of workplaces and products that can impact consumers' health. Some of such standards seek to ensure occupational safety and health and ergonomics. For example, chairs (see e.g. active sitting and steps of research) could be potentially be designed and chosen using standards that may or may not be based on adequate scientific data. Standards could reduce the variety of products and lead to convergence on fewer broad designs – which can often be efficiently mass-produced via common shared automated procedures and instruments – or formulations deemed to be the most healthy, most efficient or best compromise between healthiness and other factors. Standardization is sometimes or could also be used to ensure or increase or enable consumer health protection beyond the workplace and ergonomics such as standards in food, food production, hygiene products, tab water, cosmetics, drugs/medicine, drink and dietary supplements, especially in cases where there is robust scientific data that suggests detrimental impacts on health (e.g. of ingredients) despite being substitutable and not necessarily of consumer interest.

Clothing

Further information: Clothing sizes

Clinical assessment

In the context of assessment, standardization may define how a measuring instrument or procedure is similar to every subjects or patients. For example, educational psychologist may adopt structured interview to systematically interview the people in concern. By delivering the same procedures, all subjects is evaluated using same criteria and minimising any confounding variable that reduce the validity. Some other example includes mental status examination and personality test.

Social science

In the context of social criticism and social science, standardization often means the process of establishing standards of various kinds and improving efficiency to handle people, their interactions, cases, and so forth. Examples include formalization of judicial procedure in court, and establishing uniform criteria for diagnosing mental disease. Standardization in this sense is often discussed along with (or synonymously to) such large-scale social changes as modernization, bureaucratization, homogenization, and centralization of society.

Customer service

In the context of customer service, standardization refers to the process of developing an international standard that enables organizations to focus on customer service, while at the same time providing recognition of success through a third party organization, such as the British Standards Institution. An international standard has been developed by The International Customer Service Institute.

Supply and materials management

See also: Supply chain sustainability

In the context of supply chain management and materials management, standardization covers the process of specification and use of any item the company must buy in or make, allowable substitutions, and build or buy decisions.

Process

The process of standardization can itself be standardized. There are at least four levels of standardization: compatibility, interchangeability, commonality and reference. These standardization processes create compatibility, similarity, measurement, and symbol standards.

There are typically four different techniques for standardization

• Simplification or variety control
• Codification
• Value engineering
• Statistical process control.

Types of standardization process:

• Emergence as de facto standard: tradition, market domination, etc.
• Written by a Standards organization:
  • in a closed consensus process: Restricted membership and often having formal procedures for due-process among voting members
  • in a full consensus process: usually open to all interested and qualified parties and with formal procedures for due-process considerations
• Written by a government or regulatory body
• Written by a corporation, union, trade association, etc.
• Agile standardization. A group of entities, themselves or through an association, creates and publishes a drafted version shared for public review based on actual examples of use.

Effects

Standardization has a variety of benefits and drawbacks for firms and consumers participating in the market, and on technology and innovation.

Effect on firms

The primary effect of standardization on firms is that the basis of competition is shifted from integrated systems to individual components within the system. Prior to standardization a company's product must span the entire system because individual components from different competitors are incompatible, but after standardization each company can focus on providing an individual component of the system. When the shift toward competition based on individual components takes place, firms selling tightly integrated systems must quickly shift to a modular approach, supplying other companies with subsystems or components.

Effect on consumers

Standardization has a variety of benefits for consumers, but one of the greatest benefits is enhanced network effects. Standards increase compatibility and interoperability between products, allowing information to be shared within a larger network and attracting more consumers to use the new technology, further enhancing network effects. Other benefits of standardization to consumers are reduced uncertainty, because consumers can be more certain that they are not choosing the wrong product, and reduced lock-in, because the standard makes it more likely that there will be competing products in the space. Consumers may also get the benefit of being able to mix and match components of a system to align with their specific preferences. Once these initial benefits of standardization are realized, further benefits that accrue to consumers as a result of using the standard are driven mostly by the quality of the technologies underlying that standard.

Probably the greatest downside of standardization for consumers is lack of variety. There is no guarantee that the chosen standard will meet all consumers' needs or even that the standard is the best available option. Another downside is that if a standard is agreed upon before products are available in the market, then consumers are deprived of the penetration pricing that often results when rivals are competing to rapidly increase market share in an attempt to increase the likelihood that their product will become the standard. It is also possible that a consumer will choose a product based upon a standard that fails to become dominant. In this case, the consumer will have spent resources on a product that is ultimately less useful to him or her as the result of the standardization process.

Effect on technology

Much like the effect on consumers, the effect of standardization on technology and innovation is mixed. Meanwhile, the various links between research and standardization have been identified, also as a platform of knowledge transfer and translated into policy measures (e.g. WIPANO).

Increased adoption of a new technology as a result of standardization is important because rival and incompatible approaches competing in the marketplace can slow or even kill the growth of the technology (a state known as market fragmentation). The shift to a modularized architecture as a result of standardization brings increased flexibility, rapid introduction of new products, and the ability to more closely meet individual customer's needs.

The negative effects of standardization on technology have to do with its tendency to restrict new technology and innovation. Standards shift competition from features to price because the features are defined by the standard. The degree to which this is true depends on the specificity of the standard. Standardization in an area also rules out alternative technologies as options while encouraging others.

Natural monopoly

From Wikipedia, the free encyclopedia

 

In small countries like New Zealand, electricity transmission is a natural monopoly. Due to enormous fixed costs and small market size, one seller can serve the entire market at the downward-sloping section of its average cost curve, meaning that it will have lower average costs than any potential entrant.

A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors. Specifically, an industry is a natural monopoly if the total cost of one firm, producing the total output, is lower than the total cost of two or more firms producing the entire production. In that case, it is very probable that a company (monopoly) or minimal number of companies (oligopoly) will form, providing all or most relevant products and/or services. This frequently occurs in industries where capital costs predominate, creating large economies of scale about the size of the market; examples include public utilities such as water services, electricity, telecommunications, mail, etc. Natural monopolies were recognized as potential sources of market failure as early as the 19th century; John Stuart Mill advocated government regulation to make them serve the public good.

Definition

Two different types of cost are important in microeconomics: marginal cost, and fixed cost. The marginal cost is the cost to the company of serving one more customer. In an industry where a natural monopoly does not exist, the vast majority of industries, the marginal cost decreases with economies of scale, then increases as the company has growing pains (overworking its employees, bureaucracy, inefficiencies, etc.). Along with this, the average cost of its products decreases and increases. A natural monopoly has a very different cost structure. A natural monopoly has a high fixed cost for a product that does not depend on output, but its marginal cost of producing one more good is roughly constant, and small.

It is generally believed that there are two reasons for natural monopolies: one is economies of scale, and the other is economies of scope.

A graphical explanation of the inefficiencies of having several competitors in a naturally monopolistic market

All industries have costs associated with entering them. Often, a large portion of these costs is required for investment. Larger industries, like utilities, require an enormous initial investment. This barrier to entry reduces the number of possible entrants into the industry regardless of the earning of the corporations within. The production cost of an enterprise is not fixed, except for the effect of technology and other factors; even under the same conditions, the unit production cost of an enterprise can also tend to decrease with the increase in the total production output. The reason is that the actual product of the enterprise As it continues to expand, the original fixed costs are gradually diluted. This is particularly evident in companies with significant fixed-cost investments. Natural monopolies arise where the largest supplier in an industry, often the first supplier in a market, has an overwhelming cost advantage over other actual or potential competitors; this tends to be the case in industries where fixed costs predominate, creating economies of scale that are large in relation to the size of the market, as is the case in water and electricity services. The fixed cost of constructing a competing transmission network is so high, and the marginal cost of transmission for the incumbent so low, that it effectively bars potential competitors from the monopolist's market, acting as a nearly insurmountable barrier to entry into the market place.

A firm with high fixed costs requires a large number of customers in order to have a meaningful return on investment. This is where economies of scale become important. Since each firm has large initial costs, as the firm gains market share and increases its output the fixed cost (what they initially invested) is divided among a larger number of customers. Therefore, in industries with large initial investment requirements, average total cost declines as output increases over a much larger range of output levels.

In real life, companies produce or provide single goods and services but often diversify their operations. Suppose the cost of having multiple products by one enterprise is lower than making them separately by several enterprises. In that case, it indicates that there is an economy of scope. Since the unit product price of a company that produces a specific product alone is higher than the corresponding unit product price of a joint production company, the companies that make it separately will lose money. These companies will either withdraw from the production field or be merged, forming a monopoly. Therefore, well-known American economists Samuelson and Nordhaus pointed out that economies of scope can also produce natural monopolies.

Companies that take advantage of economies of scale often run into problems of bureaucracy; these factors interact to produce an "ideal" size for a company, at which the company's average cost of production is minimized. If that ideal size is large enough to supply the whole market, then that market is a natural monopoly.

Once a natural monopoly has been established because of the large initial cost and that, according to the rule of economies of scale, the larger corporation (to a point) has a lower average cost and therefore an advantage over its competitors. With this knowledge, no firms will attempt to enter the industry and an oligopoly or monopoly develops.

Formal definition

William Baumol (1977) provides the current formal definition of a natural monopoly. He defines a natural monopoly as "[a]n industry in which multi-firm production is more costly than production by a monopoly" (p. 810). Baumol linked the definition to the mathematical concept of subadditivity; specifically, subadditivity of the cost function. Baumol also noted that for a firm producing a single product, scale economies were a sufficient condition but not a necessary condition to prove subadditivity, the argument can be illustrated as follows:

Proposition: Strict economies of scale are sufficient but not necessary for ray average cost to be strictly declining.

Proposition: Strictly declining ray average cost implies strict ray subadditivity.

Proof

Proposition: Neither ray concavity nor ray average costs that decline everywhere are necessary for strict subadditivity.

Proof

Combining all propositions gives:

Proposition: Global scale economies are sufficient but not necessary for (strict) ray subadditivity, the condition for natural monopoly in the production of a single product or in any bundle of outputs produced in fixed proportions.

Multiproduct case

On the other hand if firms produce many products scale economies are neither sufficient nor necessary for subadditivity:

Proposition: Strict concavity of a cost function is not sufficient to guarantee subadditivity.

Proof

Therefore:

Proposition: Scale economies are neither necessary nor sufficient for subadditivity.

Mathematical Notation of Subadditivity

A cost function c is subadditive at an output x if ${\displaystyle {\displaystyle \begin{array}{rl}c(x)& =c(x^1)+c(x^2)+...+c(x^k)\end{array}}}$ such that ${\displaystyle \sum _{i=1}^k{x}^i=x}$, with all x being non-negative. In other words, if all companies have the same production cost function, the one with the better technology should monopolize the entire market such that the total cost is minimized, thus causing natural monopoly due to its technological advantage or condition.

Examples

1. Railways:
   The costs of laying tracks and building networks coupled with that of buying or leasing the trains prohibits or deters the entry of any competitor. Rail transport also fits other characteristics of a natural monopoly because it is assumed to be an industry with significant long run economies of scale.
2. Telecommunications and Utilities:
   The costs of building telecommunication poles and growing a cell network would just be too exhausting for other competitors to exist. Electricity requires grids and cables whilst water services and gas both require pipelines whose costs are just too high to be able to have existing competitors in the public market. However, natural monopolies are usually regulated and they face increasing competition from private networks and specialty carriers.

History

The development of the concept of natural monopoly is often attributed to John Stuart Mill, who (writing before the marginalist revolution) believed that prices would reflect the costs of production in absence of an artificial or natural monopoly. In Principles of Political Economy Mill criticised Smith's neglect of an area that could explain wage disparity (the term itself was already in use in Smith's times, but with a slightly different meaning). Taking up the examples of professionals such as jewellers, physicians and lawyers, he said,

The superiority of reward is not here the consequence of competition, but of its absence: not a compensation for disadvantages inherent in the employment, but an extra advantage; a kind of monopoly price, the effect not of a legal, but of what has been termed a natural monopoly... independently of... artificial monopolies [i.e. grants by government], there is a natural monopoly in favour of skilled labourers against the unskilled, which makes the difference of reward exceed, sometimes in a manifold proportion, what is sufficient merely to equalize their advantages.

Mill's initial use of the term concerned natural abilities. In contrast, common contemporary usage refers solely to market failure in a particular type of industry such as rail, post or electricity. Mill's development of the idea that 'what is true of labour, is true of capital'. He continues;

All the natural monopolies (meaning thereby those which are created by circumstances, and not by law) which produce or aggravate the disparities in the remuneration of different kinds of labour, operate similarly between different employments of capital. If a business can only be advantageously carried on by a large capital, this in most countries limits so narrowly the class of persons who can enter into the employment, that they are enabled to keep their rate of profit above the general level. A trade may also, from the nature of the case, be confined to so few hands, that profits may admit of being kept up by a combination among the dealers. It is well known that even among so numerous a body as the London booksellers, this sort of combination long continued to exist. I have already mentioned the case of the gas and water companies.

Mill also applied the term to land, which can manifest a natural monopoly by virtue of it being the only land with a particular mineral, etc. Furthermore, Mill referred to network industries, such as electricity and water supply, roads, rail and canals, as "practical monopolies", where "it is the part of the government, either to subject the business to reasonable conditions for the general advantage or to retain such power over it, that the profits of the monopoly may at least be obtained for the public." So, a legal prohibition against non-government competitors is often advocated. Whereby the rates are not left to the market but are regulated by the government; maximising profits, and subsequently societal reinvestment.

For a discussion of the historical origins of the term 'natural monopoly' see Mosca.

Regulation

As with all monopolies, a monopolist that has gained its position through natural monopoly effects may engage in behaviour that abuses its market position. In cases where exploitation occurs, it often leads to calls from consumers for government regulation. Government regulation may also come about at the request of a business hoping to enter a market otherwise dominated by a natural monopoly.

Common arguments in favour of regulation include the desire to limit a company's potentially abusive or unfair market power, facilitate competition, promote investment or system expansion, or stabilise markets. This is especially true in the case of essential utilities like electricity where a monopoly creates a captive market for a product few can refuse. In general, though, regulation occurs when the government believes that the operator, left to his own devices, would behave in a way that is contrary to the public interest. In some countries an early solution to this perceived problem was government provision of, for example, a utility service. Enabling a monopolistic company with the ability to change prices without regulation can have devastating effects in society. Ramifications of which can be displayed in Bolivia’s 2000 Cochabamba protests. A situation whereby a firm with a monopoly on the supply of water, excessively increased water rates to fund a dam; leaving many unable to afford the essential good.

History

A wave of nationalisation across Europe after World War II created state-owned companies in each of these areas, many of which operate internationally bidding on utility contracts in other countries. However, this approach can raise its own problems. In the past, some governments have used the state-provided utility services as a source of cash flow for funding other government activities, or as a means of obtaining hard currency. As a result, governments seeking funding began to seek other solutions, namely regulation and providing services on a commercial basis, often through private participation.

In recent years, bodies of information have observed the correlation between utility subsidies and welfare improvements. Today, across the world, public utilities are widely used to provide state-run water, electricity, gas, telecommunications, mass-transportation and postal services.

Alternative regulation

Alternatives to a state-owned response to natural monopolies include both open source licensed technology and co-operatives management where a monopoly's users or workers own the monopoly. For instance, the web's open-source architecture has both stimulated massive growth and avoided a single company controlling the entire market. The Depository Trust and Clearing Corporation is an American co-op that provides the majority of clearing and financial settlement across the securities industry ensuring they cannot abuse their market position to raise costs. In recent years a combined cooperative and open-source alternative to emergent web monopolies has been proposed, a platform cooperative, where, for instance, Uber could be a driver-owned cooperative developing and sharing open-source software.

Monopolistic competition

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Monopolistic_competition 

 

Short-run equilibrium of the company under monopolistic competition. The company maximises its profits and produces a quantity where the company's marginal revenue (MR) is equal to its marginal cost (MC). The company is able to collect a price based on the average revenue (AR) curve. The difference between the company's average revenue and average cost, multiplied by the quantity sold (Qs), gives the total profit. A short-run monopolistic competition equilibrium graph has the same properties of a monopoly equilibrium graph.

 

Monopolistic competition is a type of imperfect competition such that there are many producers competing against each other, but selling products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes. In monopolistic competition, a company takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other companies. If this happens in the presence of a coercive government, monopolistic competition will fall into government-granted monopoly. Unlike perfect competition, the company maintains spare capacity. Models of monopolistic competition are often used to model industries. Textbook examples of industries with market structures similar to monopolistic competition include restaurants, cereals, clothing, shoes, and service industries in large cities. The "founding father" of the theory of monopolistic competition is Edward Hastings Chamberlin, who wrote a pioneering book on the subject, Theory of Monopolistic Competition (1933). Joan Robinson published a book The Economics of Imperfect Competition with a comparable theme of distinguishing perfect from imperfect competition. Further work on monopolistic competition was undertaken by Dixit and Stiglitz who created the Dixit-Stiglitz model which has proved applicable used in the sub fields of international trade theory, macroeconomics and economic geography.

Monopolistically competitive markets have the following characteristics:

• There are many producers and many consumers in the market, and no business has total control over the market price.
• Consumers perceive that there are non-price differences among the competitors' products.
• Companies operate with the knowledge that their actions will not affect other companies' actions.
• There are few barriers to entry and exit.
• Producers have a degree of control over price.
• The principal goal of the company is to maximise its profits.
• Factor prices and technology are given.
• A company is assumed to behave as if it knew its demand and cost curves with certainty.
• The decision regarding price and output of any company does not affect the behaviour of other companies in a group, i.e., impact of the decision made by a single company is spread sufficiently evenly across the entire group. Thus, there is no conscious rivalry among the company.
• Each company earns only normal profit in the long run.
• Each company spends substantial amount on advertisement. The publicity and advertisement costs are known as selling costs.

The long-run characteristics of a monopolistically competitive market are almost the same as a perfectly competitive market. Two differences between the two are that monopolistic competition produces heterogeneous products and that monopolistic competition involves a great deal of non-price competition, which is based on subtle product differentiation. A firm making profits in the short run will nonetheless only break even in the long run because demand will decrease and average total cost will increase. This means in the long run, a monopolistically-competitive company will make zero economic profit. This illustrates the amount of influence the company has over the market; because of brand loyalty, it can raise its prices without losing all of its customers. This means that an individual company's demand curve is downward sloping, in contrast to perfect competition, which has a perfectly elastic demand schedule.

Characteristics

There are six characteristics of monopolistic competition (MC):

• Product differentiation
• Many companies
• Freedom of entry and exit
• Independent decision making
• Some degree of market power
• Buyers and sellers do not have perfect information

Product differentiation

MC companies sell products that have real or perceived non-price differences. Examples of these differences could include physical aspects of the product, location from which it sells the product or intangible aspects of the product, among others. However, the differences are not so great as to eliminate other goods as substitutes. Technically, the cross price elasticity of demand between goods in such a market is positive. In fact, the cross elasticity of demand would be high. MC goods are best described as close but imperfect substitutes. The goods perform the same basic functions but have differences in qualities such as type, style, quality, reputation, appearance, and location that tend to distinguish them from each other. For example, the basic function of motor vehicles is the same—to move people and objects from point to point in reasonable comfort and safety. Yet there are many different types of motor vehicles such as motor scooters, motor cycles, trucks and cars, and many variations even within these categories.

Many companies

There are many companies in each MC product group and many companies on the side lines prepared to enter the market. A product group is a "collection of similar products". The fact that there are "many companies" means that each company has a small market share. This gives each MC company the freedom to set prices without engaging in strategic decision making regarding the prices of other companies (no mutual independence) and each company's actions have a negligible impact on the market. For example, a company could cut prices and increase sales without fear that its actions will prompt retaliatory responses from competitors.

The number of companies that an MC market structure will support at market equilibrium depends on factors such as fixed costs, economies of scale, and the degree of product differentiation. For example, the higher the fixed costs, the fewer companies the market will support.

Freedom of entry and exit

Like perfect competition, under monopolistic competition also, the companies can enter or exit freely. The companies will enter when the existing companies are making super-normal profits. With the entry of new companies, the supply would increase which would reduce the price and hence the existing companies will be left only with normal profits. Similarly, if the existing companies are sustaining losses, some of the marginal firms will exit. It will reduce the supply due to which price would rise and the existing firms will be left only with normal profit.

Independent decision making

Each MC company independently sets the terms of exchange for its product. The company gives no consideration to what effect its decision may have on its competitors. The theory is that any action will have such a negligible effect on the overall market demand that an MC company can act without fear of prompting heightened competition. In other words, each company feels free to set prices as if it were a monopoly rather than an oligopoly.

Market power

MC companies have some degree of market power, although relatively low. Market power means that the company has control over the terms and conditions of exchange. All MC companies are price makers. An MC companies can raise its prices without losing all its customers. The company can also lower prices without triggering a potentially ruinous price war with competitors. The source of an MC company's market power is not barriers to entry since they are low. Rather, an MC company has market power because it has relatively few competitors, those competitors do not engage in strategic decision making and the companies sells differentiated product. Market power also means that an MC company faces a downward sloping demand curve. In the long run, the demand curve is highly elastic, meaning that it is sensitive to price changes although it is not completely "flat". In the short run, economic profit is positive, but it approaches zero in the long run.

Imperfect information

No other sellers or buyers have complete market information, like market demand or market supply.

Inefficiency

There are two sources of inefficiency in the MC market structure. The first source of inefficiency is that, at its optimum output, the company charges a price that exceeds marginal costs. The MC company maximises profits where marginal revenue equals marginal cost. Since the MC company's demand curve is downwards-sloping, the company will charge a price that exceeds marginal costs. The monopoly power possessed by a MC company means that at its profit-maximising level of production, there will be a net loss of consumer (and producer) surplus. The second source of inefficiency is the fact that MC companies operate with excess capacity. That is that the MC company's profit-maximising output is less than the output associated with minimum average cost. Both an MC and PC company will operate at a point where demand or price equals average cost. For a PC company, this equilibrium condition occurs where the perfectly elastic demand curve equals minimum average cost. A MC company's demand curve is not flat but is downwards-sloping. Thus, the demand curve will be tangential to the long-run average cost curve at a point to the left of its minimum. The result is excess capacity.

Socially-undesirable aspects compared to perfect competition

• Selling costs: Producers under monopolistic competition often spend substantial amounts on advertising and publicity. Much of this expenditure is wasteful from the social point of view. The producer can reduce the price of the product instead of spending on publicity.
• Excess capacity: Under Imperfect competition, the installed capacity of every firm is large, but not fully used. Total output is, therefore, less than the output which is socially desirable. Since production capacity is not fully used, the resources lie idle. Therefore, the production under monopolistic competition is below the full capacity level.
• Unemployment: Idle capacity under monopolistic competition expenditure leads to unemployment. In particular, unemployment of workers leads to poverty and misery in the society. If idle capacity is fully used, the problem of unemployment can be solved to some extent.
• Cross transport: Under monopolistic competition expenditure is incurred on cross transportation. If the goods are sold locally, wasteful expenditure on cross transport could be avoided.
• Lack of specialisation: Under monopolistic competition, there is little scope for specialisation or standardisation. Product differentiation practised under this competition leads to wasteful expenditure. It is argued that instead of producing too many similar products, only a few standardised products may be produced. This would ensure better allocation of resources and would promote the economic success of the society.
• Inefficiency: Under perfect competition, an inefficient company is thrown out of the industry. But under monopolistic competition, inefficient companies continue to survive.

Problems

Monopolistically-competitive companies are inefficient, it is usually the case that the costs of regulating prices for products sold in monopolistic competition exceed the benefits of such regulation. A monopolistically-competitive company might be said to be marginally inefficient because the company produces at an output where average total cost is not a minimum. A monopolistically-competitive market is productively inefficient market structure because marginal cost is less than price in the long run. Monopolistically-competitive markets are also allocative-inefficient, as the company charges prices that exceed marginal cost. Product differentiation increases total utility by better meeting people's wants than homogenous products in a perfectly competitive market.

Another concern is that monopolistic competition fosters advertising. There are two main ways to conceive how advertising works under a monopolistic competition framework. Advertising can either cause a company's perceived demand curve to become more inelastic; or advertising causes demand for the company's product to increase. In either case, a successful advertising campaign may allow a company to sell a greater quantity or to charge a higher price, or both, and thus increase its profits. This allows the creation of brand names. Advertising induces customers into spending more on products because of the name associated with them rather than because of rational factors. Defenders of advertising dispute this, arguing that brand names can represent a guarantee of quality and that advertising helps reduce the cost to consumers of weighing the trade-offs of numerous competing brands. There are unique information and information processing costs associated with selecting a brand in a monopolistically competitive environment. In a monopoly market, the consumer is faced with a single brand, making information gathering relatively inexpensive. In a perfectly competitive industry, the consumer is faced with many brands, but because the brands are virtually identical information gathering is also relatively inexpensive. In a monopolistically competitive market, the consumer must collect and process information on a large number of different brands to be able to select the best of them. In many cases, the cost of gathering information necessary to selecting the best brand can exceed the benefit of consuming the best brand instead of a randomly selected brand. The result is that the consumer is confused. Some brands gain prestige value and can extract an additional price for that.

Evidence suggests that consumers use information obtained from advertising not only to assess the single brand advertised, but also to infer the possible existence of brands that the consumer has, heretofore, not observed, as well as to infer consumer satisfaction with brands similar to the advertised brand.

Examples

In many markets, such as toothpaste, soap, air conditioning, smartphones and toilet paper, producers practice product differentiation by altering the physical composition of products, using special packaging, or simply claiming to have superior products based on brand images or advertising.