The Problem of Governance: A Critical Review of Dan Greenwood’s Effective Governance and the Political Economy of Coordination

Abstract

This essay critically examines Dan Greenwood’s Effective Governance and the Political Economy of Coordination. Greenwood’s book offers a compelling framework for evaluating government policy, drawing insights from the Austrian and Bloomington schools of political economy. His central argument is that governance is more effective at “steering” markets toward broad goals rather than directly providing goods and services. He builds this case on Hayekian concepts of complexity and dispersed knowledge, proposing a qualitative, stakeholder-focused approach to assess “coordinative effectiveness.” This review argues that Greenwood's analysis does not fully grapple with the dual problems of “radical dissonance” and “radical uncertainty.” Radical dissonance refers to the existence of opposing and often irreconcilable societal values and interests, while radical uncertainty points to the fundamental unpredictability of future outcomes. These issues, we contend, challenge the very possibility of achieving a neutral institutional framework to justify such steering. Any institutional design, including one based on general rules, inevitably has distributional consequences and creates path dependencies, making it a site of conflict as well as coordination. The review explores how these problems affect both first-order policy choices and second-order decisions about institutional rules, questioning whether widely shared principles for shaping market patterns can ever be truly established. Despite these criticisms, Greenwood's work is a uniquely successful and provocative contribution that bridges disparate literatures and stimulates crucial dialogue on the complex dimensions of governance.