Rules vs Standards: Designing Good Laws

The trade-off between clear, simple rules and flexible standards, and how lawmakers choose between them.

Should a law say “Do not drive faster than 100 kilometres per hour” or “Do not drive faster than is safe for the conditions”? The first is a rule: precise and easy to check. The second is a standard: flexible, but requiring judgement. Choosing between them is one of the basic design choices in law, and economists have studied the trade-offs closely.

The case for rules

Rules are clear. People know in advance exactly what is allowed, which economists call legal certainty. Rules are cheap to apply: a police officer with a speed camera does not need to weigh every circumstance. And rules treat people the same way, which limits bias from whoever is applying them.

The downside is that rules are blunt. A 100 kilometre limit is too high on an icy night and may be needlessly low on an empty road on a clear day.

The case for standards

Standards adapt to circumstances. “Drive at a safe speed” covers the icy night and the empty road alike. But standards are harder to follow, because people must guess how a court will judge their actions later. They also cost more to apply, since every case needs investigation and judgement, and they leave more room for inconsistent decisions.

How to choose

The economist Louis Kaplow suggested a useful test. When a type of situation happens very often, it pays to spend effort once writing a detailed rule, because the cost of drafting is spread over many cases. When situations are rare and varied, a standard is cheaper, because it avoids writing rules for events that may never happen.

Tax law and negligence

Tax law is mostly written as detailed rules, because millions of people file returns every year and need to know exactly what they owe. Accident law relies more on the standard of reasonable care, because accidents take countless different forms that no rulebook could predict.

Thinking one approach is simply better

Neither rules nor standards are always superior. Many laws mix both, with a clear rule for common cases and a standard for unusual ones. The right choice depends on how often situations arise, how varied they are, and how costly mistakes would be.

Key takeaways

Rules are precise and cheap to apply, but can be too blunt for unusual cases.
Standards adapt to circumstances, but are harder to predict and costlier to apply.
Frequent, similar situations favour rules; rare, varied situations favour standards.
Many laws combine a clear rule with a flexible standard.