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Private GovernanceCreating Order in Economic and Social Life$
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Edward Peter Stringham

Print publication date: 2015

Print ISBN-13: 9780199365166

Published to Oxford Scholarship Online: August 2015

DOI: 10.1093/acprof:oso/9780199365166.001.0001

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The Unseen Beauty that Underpins Markets

The Unseen Beauty that Underpins Markets

Chapter:
(p.226) chapter 14 The Unseen Beauty that Underpins Markets
Source:
Private Governance
Author(s):

Edward Peter Stringham

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199365166.003.0014

Even where governments are pervasive, so too is private governance, and it works behind the scenes to make advanced markets possible. Whether people notice or not, market exchange is governed by multiple layers of private governance. Order can be attributed to a combination of trust, reciprocity, reputation, due diligence, bonding, risk management, and various business relationships for profit. Most people are not aware that a potential problem even existed, whereas others simply misattribute the solution to government. Private governance works in simple markets with small numbers of homogeneous traders who have low discount rates, but it also works in large groups, among heterogeneous traders, with nonrepeat interaction, and for tremendously complex deals. Private governance facilitates cooperation between billions of people within and across political boundaries.

Keywords:   invisible hand mechanism, seen and unseen, emergent order, trust, reciprocity

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