The paper examines centuries old informal footwear cluster in India, and describes the instrument of informal trade credit, ingeniously designed and sustained by the market participants. A peculiar feature of this instrument is the shared knowledge of the creditworthiness of the traders. This knowledge is produced and consumed by the market participants as a useful resource in estimating discount on the credit. Using Ostrom’s IAD framework (its modified version) the paper attempts to understand the governance of knowledge commons in the market. In order to do so, it identifies the socio-cultural infrastructure which enables such governance. In helping identify the theoretical link between informal markets and knowledge commons through this case, the paper advances a promising step for future research not only in knowledge commons structures, but also in informal markets around the world.

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.

In many parts of the world property rights are not publicly guaranteed. Private market associations can fill this gap by providing an institutional structure to enforce agreements, but with this power comes the ability to extort from group members. Chapter 1 introduces the book’s motivating puzzle: Despite shared need for private good governance, not all private group leaders provide pro-trade policies. Under what circumstances do private associations provide a stable environment for economic activity? The chapter introduces the book’s main argument, that threats from the government can motivate group leaders to provide trade-promoting policies, but that within-group competition matters as well. The chapter then overviews the book’s key theoretical contributions to the political economy of development and private governance literatures. Next, it introduces theoretical expectations for additional variables, besides government threats and competition, that could shape private good governance. It then provides an overview of Lagos, Nigeria, the context in which the research takes place. Last, it overviews the book’s methods, and provides a road map for the rest of the book.