At the other extreme of the enforcement pyramid, the usefulness of a strategy of enforced self-regulation may depend on the existence of shared norms of behavior among commercial actors within a particular industry or other context. Where self enforcing norms of this kind are found, the costs of regulatory intervention can be substantially reduced in a number of ways. Where there are ‘interpretive communities’ of actors, the risk of opportunistic or ‘creative’ compliance with rules may be reduced. It also allows regulators to frame rules as generalized standards, that is to say, as open-ended norms whose interpretation and application can be left up to the parties, to whom they are addressed, hence reducing the complexity of rules. This also enables rules to evolve in response to a changing economic environment. To be inside an interpretive community means to be already and always thinking and perceiving within the norms, standards, definitions, routines of that community and to share an understanding of the goals that both define and are defined by that context. The greater the degree to which these are common amongst those writing, applying and enforcing the rules, the less it has to be rendered explicit. This has implications both for the degree to which rules have to use precision in an attempt to control and cope with a greater range of contingencies or changes which may arise. What is important is not the weight of regulation in any one system, but rather the effectiveness of the links between regulations at different levels.
This is not to suggest that the social norms and conventions of ‘interpretive communities’ should always be regarded as efficient or desirable. They could operate against the interests of third party groups who are excluded from the rule- making process or against what is perceived to be the public interest in a wider sense. Rather, what is being suggested is that one route by which more formal regulation can be made effective is for it to work in conjunction with social norms. Even if this is not possible, an awareness of the existence and effect of informal regulation should be an important aspect of the design of more formal rules.