The findings of studies of local economies can be applied to those concerned with ‘shadow’ and illegal activities. These activities need to be seen not as situations with an absence of governance and markets, but as constituting particular kinds of governance—this often being concerned with ensuring the functioning of markets. A scheme for modelling this type of governance is proposed, and is then used to formulate a critique of most of the prevailing policy approaches to trying to counter the shadow economy and to encourage the ‘emersion’ of firms from it. Some instances of policies that are better grounded in an appreciation of the reality of the shadow economy as a social order are also cited.
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