Balancing among Market, Hierarchy and Self-organization

Extending Governance Modes to the Public Sectors

Selecting from among the three governance modes – hierarchy, market and self-organization – is necessary not only for a specific organization, but also for public administration. In this situation, hierarchy refers to reliance on the government's top-down powers, while self-organization refers to reliance on social forces, or various non-governmental voluntary organizations, such as NPOs, associations, clubs and communities. Accordingly, these three governance structures are also called ―government‖, ―society‖ and ―market‖ respectively.

The same concept of ―self-organization‖ has long been explained in numerous theories with respect to public governance. Next, I would like to use Nan Lin's theory (Lin, 2009) to explain sociological theories and positions on this issue. Most sociologists believe that three forces – government, market and society – should coexist in public governance. Public sectors can develop harmoniously only when the three forces are well balanced and work together. Lin referred to the three forces as ―governmental power‖, ―individual rights‖ and ―community power.‖ Among them, ―governmental power‖ refers to the government's top-down hierarchy-based governance; individuals' rights, which mainly include property rights, refer to people's rights for free exchange in the marketplace; community power refers to the bottom-up power held by self-organized units.

There are a wide range of communities that lead to community power. Specifically, communities in our society include NGOs, clubs, online virtual groups, professional groups, industrial associations, urban communities, rural autonomous groups, etc. In the future, online virtual groups will become a more and more important form of self-organized unit in China. For example, travel mate clubs were such important communities during the donation process after the 2008 Sichuan Earthquake. These clubs consist of travel lovers who chat online and travel together when free. After the 2008 Sichuan Earthquake occurred, a large number of travel mate clubs organized their members to contribute to the post-quake reconstruction. They donated money or necessities, or spent their holidays participating in the reconstruction efforts in the quake-stricken areas. Such community actions were among the examples of community power.

Industrial associations are another type of communities. When I was having interviews with some managers in high-tech manufacturing, I was impressed by what they told me, ―This community is just a small world with only a few hundred so-called players.‖ It is for this reason that the insiders will always know who has done something bad or which company makes products of poor quality. Industrial associations therefore play the role of internal supervisors in the industry. Regional groups, such rural clans and urban apartment complexes or street committees, may also self-organize into associations valuable for property management in apartment complexes and for creating a better public life.

Ostrom was a pioneer in proposing self-organization as the third governance model in public administration; she took the management of common pool resources for example. When it comes to research on the governance of public resources, tragedy of the commons used to be a common issue. Since the ownership of common pool resources is unclear, people tend to use them from the perspective of maximizing personal gains, while overlooking the protection and long-term management of these resources. This typically results in damages to the resources. There are two traditional solutions to this problem – relying on the market or on the government. As for the first one, certain mechanisms are devised to make users pay for their use of public resources, or, alternatively, to privatize these resources. Nonetheless, full privatization is often infeasible in reality, and it is very difficult to devise perfect mechanisms. As for the second one, the government decides who has the right to use public resources such as land and mines, how to use them, how long they can be used, etc. One of the risks with this solution is that the power holder is prone to abuse the public power, which in turn causes defalcation, corruption and other malefactions. Ostrom found out, therefore, that in addition to government and market, there was the possibility of self-governing public resources: hierarchy-based governance applies to products that are publicly owned and publicly used; market-based governance applies to products that are privately owned and exclusively used; and self-organization-based governance (or self-governance) applies to products that are publicly owned and exclusively used.

 
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