Civil society, state and market by Bowles and Carlin in Annual Review of Economics

 Sam Bowles and Wendy Carlin propose that we should think of civil society as the third leg in regulating economic life, along with government and markets. (They use kidney exchange as an example to indicate what they mean.) 

The Governance Triangle: Economic interactions in civil society, the state, and the market, Bowles, Samuel; Carlin, Wendy; (2026), Annual Review of Economics. 

"Abstract: Interactions in civil society – in firms, families, neighborhoods, identity groups, and other face-to-face settings – have in common that relationships are personal and enduring, and as a result, identity and other-regarding preferences are important motivations (for better or worse). Here we add civil society to markets and states as a third form of governance of the economy, creating the governance triangle. We provide evidence that themes related to civil society have assumed substantially greater importance in economic research since the 1970s. We use a standard principal-agent model of employment in private firms to reveal three characteristics of interactions in civil society: the role of face-to-face interactions, social norms, and the private exercise of power. We show that market failures and other coordination problems can sometimes be more successfully addressed by civil society than by state or market governance. Civil society may have comparative institutional advantage where information available to state and market actors is limited, restricting the reach of complete contracts and enforceable government regulations, conditional on conflicts of interest being modest. When based on us-versus-them forms of identity, however, civil society governance may promote preferences antithetical to a liberal and democratic society." 

 

 

"To illustrate the meaning of points in the triangle, we have placed the kidney exchange model proposed by Alvin Roth and his collaborators (the red dot) in the governance triangle ((Roth et al 2006).) They designed a mechanism connecting those needing a kidney replacement to altruistic donors of kidneys. Such donors are most often an immediate family member of someone whose kidney is not a match for their loved-one needing the transplant. Roth’s algorithm enables long chains of unrelated matched donors and recipients, thereby widening access to transplants because they do not have to be conducted bilaterally (the donor giving to a particular match) and contemporaneously.

"As an illustration of the nexus of synergistic institutions in the triangle, we represent the kidney donor mechanism, the red point, by a weight of 0.3 on the state (which regulates the exchanges, including prohibiting sales), 0.2 on the market (which provides associated medical services), and 0.5 on civil society (for the centrality of altruistic and ethical motivations underlying the initial contribution of the kidney.)... By relating the characteristics of behaviour and the allocation mechanisms involved to the three pure types, other institutions and policies can be located inside the triangle."

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Note that this representation in a triangle is in a barycentric coordinate system, which has only become a readily recognizable tool in various applications in economics in the last half century or so.  Wikipedia dates their introduction to 1827.