4 - A Calm Sea Does not Make a Good Sailor: A Theory of Private Good Governance

Summary

Chapter 4 starts by presenting two broad critiques of the private governance literature. First, this research sometimes assumes that groups can self-regulate without group leaders. While this might be the case for some small groups, leaders are critical for cooperation in many groups. Second, scholars have overlooked the obstacles group leaders must overcome in order to govern well – such as impediments to truthful information sharing and impartial dispute enforcement – which has generated the faulty assumption that private order will emerge when it is needed. It then develops the logic of the argument, which sheds light on the conditions that make private trade-promoting policies more likely. While previous studies of private groups suggest that private institutions substitute for public institutions, the book’s argument is that state threats can encourage private good governance; private associations will predate without public institutions that force them to behave otherwise. The chapter also introduces the role of within-groups competition, theorizing about how competition increases the hurdles to private group leaders implementing trade-promoting policies. It then discusses the possibility of group leader-politician collusion, along with the way that relational contracting relates to the argument.