Markets and Knowledge Commons: Is There a Difference Between Private and Community Governance of Markets?

Abstract

It is well-established that market governance can be provided by both public (state) and private organizations. However, the concept of private governance has been used, this article contends, to refer to two distinct forms of non-state governance: private governance and community governance. We distinguish between these two forms, arguing that private governance should be understood as the provision of market governance by (external) private parties, while community governance refers to a process where a group, a community, or society has the autonomy to govern its own affairs without interference from external authorities. The former internalizes the externalities associated with governance, while the latter comes about mainly as an unintended externality of social interaction in markets. To further illuminate the differences, and the relative strengths of these types of non-state governance, we distinguish among three elements of market governance: (1) the formation and interpretation of rules, (2) the administration of rules of ownership and exchange, and (3) the enforcement of rules. We argue that community governance is of great relevance for the formation and interpretation of the rules of ownership and exchange, which is consequently very hard to outsource to external parties, private or public. Community governance also plays a frequently overlooked role in administration and enforcement through the process of co-production. Rule formation and interpretation are theorized as the epistemic components of market governance, which can be analyzed within the Governing Knowledge Commons framework.

Keywords: Market governance, Rule formation, Joint production, Co-production; Property rights

JEL Classification: E02, E58, H41, P5