Edward Stringham’s Private Governance presents a free market defense of privatization in rule making. Although the introduction to the book sets out a more modest goal of describing “some of the major mechanism that private parties use to produce social order” while highlighting “how modern markets would not be possible without them” (p. 5), the book presents a libertarian critique of the necessity of the state and a celebration of market-based governance. Engaging economists and legal scholars from the Law and Economics school, the book attacks what Stringham calls “legal centralism”—the notion that some universal and formal legal systems are necessary for the functioning of economy and society. This concept thus groups together economists of quite different stripes, ranging from the positivist New Institutionalism of scholars (such as Douglas North and Oliver Williamson, who recognized that societies have systems of rule that structure decision making and that such systems can be studied) to others in Stringham’s own more normatively oriented Austrian school (including Friedrich Hayek himself, who recognized only the thinnest forms of liberal state power as legitimate). Stringham attempts to essentially out-Hayek Hayek by claiming that even his highly constrained visions of the state and law are still too statist and that society would be better served by private rules.

The rationale for this vision is set out in the first three chapters. The chapters are characterized by a stylized version of reasoning where Stringham attempts to show that government law making does not solve all problems and that, in light of such a fact, individuals devise other means of pursuing their interests. In Chapter 3, Stringham offers his model of private governance as based around associations and clubs that set agreed-upon rules for their members. Individuals join these clubs freely because they perceive some advantage to these rules and these clubs can maintain their reputations and rules by excluding individuals. Stringham sees exclusion as a “right” of voluntary association, and presumably envisions a society governed by a wide variety of clubs competing with one another to profitably provide rules that people want. This initial section of the book is followed by a series of disjointed chapters that shift between historical and contemporary examples of what Stringham considers to be “private governance.” The content and arguments of these chapters are scattershot. Some chapters consider the types of rules and agreements individuals compose to govern specific markets or associations, such as the rules governing the early history of the London or New York Stock Exchanges, or the mechanisms of fraud detection in online payment systems, such as PayPal. Others chapters are farther afield, including chapters on morality and self-government, private policing, a defense of arbitration, and an unconvincing exculpation of the financial instruments centrally involved with the 2008 financial crisis. The final chapters attempt to summarize the argument, including an interesting critique of Hayek’s understanding of law and the “unseen beauty” underpinning markets.

Unless one is already a true believer, historically minded scholars will find the argument frustrating and unsatisfying on a number of accounts. First and foremost is the way in which Stringham focuses on the most laudable elements of private institutions without engaging their well-documented problems. For instance, Stringham claims private policing in San Francisco is effective at protecting property owners’ interests. This is unsurprising. The important question, however, is the broader impact of private policing, not just for property owners but for society as a whole, including workers and those without property, which are groups whose interests Stringham either dismisses or ignores. Likewise, Stringham’s discussion of arbitration agreements shows that arbitration is effective at dispute resolution among eBay users; yet focusing on eBay’s ability to manage conflicts among individual buyers and sellers fails to deal with ways arbitration works in favor of large companies. As has been well documented, including recently in the New York Times, arbitration clauses in end-user agreements eliminate individual consumer’s access to courts, as well as the potential for class action lawsuits. ^{Footnote 1} Stringham’s avoidance of the social dimensions of private governance reaches its apex in his assessment of the privatized regulation of financial instruments during the 2008 crisis. He argues that mortgage-backed securities and collateralized debt obligations worked as they were intended, pricing and hedging against risks in the market without eliminating them. As with the other examples, this could be true, but it fails to deal with the more central issue of systemic risks in the financial system or the broader social, economic, and political fallout from massive devaluation in the housing market.

Beyond these problems, the more damning issue is the decontextualized way Stringham treats the central idea of his book: the private. Stringham, for his part, takes his notion of “private,” as well as “government” and “clubs,” from the dictionary. Private clubs are thus treated trans-historically as places where individuals voluntary submit to rules; opposed to this are governments that impose rules over people in a territory. This is not empirically accurate, as people and companies migrate to new state jurisdictions all the time, and, as Robert Hale once taught us, private entities coerce. ^{Footnote 2} More importantly from a historical perspective, there is now a wealth of scholarship demonstrating that the concepts of the private, as well as those of the government, the market, and the public, are themselves historical, developing in relation to nation-states and new concepts of law and authority. ^{Footnote 3} As the extensive literature on the public sphere has shown, ^{Footnote 4} places like the eighteenth-century coffeehouses of London and Amsterdam that Stringham writes about were not simply “private clubs” but locations where new liberal concepts of power and authority were debated and produced. Even accepting the dictionary definition of these concepts, any account of the emergence of these markets would see that they were intertwined in inextricable ways with state authority and political processes. Not only were merchants trading shares of state-charter companies, including the Bank of England and the East India Company, but they were also connected with public financing. As Bruce Carruthers has demonstrated, individual trading was closely tied to political affiliations. ^{Footnote 5} Thus, the important issues are not whether states fail to do things (of course they do!) or whether private rules precede public power, as Stringham wants to argue. The important issues are the ways that different modes of both private and public governance have been organized in relation to one another. This includes the variegated social, political, and economic impacts of such regimes for different people in different places. Recognizing as much significantly undermines not only the central argument, but also the basic framing of the book.