Market-Based Governance

Supply Side, Demand Side, Upside, and Downside

The latest in a series exploring twenty-first-century governance, this new volume examines the use of market means to pursue public goals. "Market-based governance" includes both the delegation of traditionally governmental functions to private players, and the importation into government of market-style management approaches and mechanisms of accountability.

The contributors (all from Harvard University) assess market-based governance from four perspectives:

  • The "demand side" deals with new, revised, or newly important forms of interaction between government and the market where the public sector is the "customer." Chapters in this section include Steve Kelman on federal procurement reform, Karen Eggleston and Richard Zeckhauser on contracting for health care, and Peter Frumkin.
  • The "supply side" section deals with unsettled questions about government's role as a provider (rather than a purchaser) within the market system. Contributors include Georges de Menil, Frederick Schauer and Virginia Wise.
  • A third section explores experiments with market-based arrangements for orchestrating accountability outside government by altering the incentives that operate inside market institutions. Chapters include Robert Stavins on market-based environmental policy, Archon Fung on "social markets," and Cary Coglianese and David Lazer.
  • The final section examines both the upside and the downside of the market-based approach to improving governance. Contributors include Elaine Kamarck, John D. Donahue, Mark Moore, and Robert Behn.

An introduction by John D. Donahue frames market-based governance as an effort to engineer into public work some of the "intensive" accountability that characterizes markets without surrendering the "extensive" accountability of conventional government. A preface by Joseph S. Nye Jr. sets the book in the context of a larger inquiry into the future of governance.