Market is a complex and rigorous environmental governance instrument, and building a nested institutional system is a necessary condition for the market mechanism to play its advantages in the governance of the rural commons. Institutions can not only limit the profit-seeking nature of the market mechanism and reduce the transaction cost of the market, but also help expand the market and achieve the unity of fairness and efficiency. Focusing on whether and how the market mechanism can improve the governance of rural living environment, this paper makes an empirical analysis with 133 villages and 976 farmers in southwest of China as samples. Research shows that it is difficult for a single market mechanism to improve the governance of rural living environment. When the government-led institutional rules intervene, the advantages of market mechanism can be brought into play under the protection and constraint of high-level institutional rules. On this basis, this paper discusses the relationship between the government and the market in the governance of the rural commons by using the nested institutional system analysis framework, and summarizes the institutional design of "market under institution". The institutions have a crowding-out effect on the market mechanism, that is, although the government-led institutional rules will weaken the promotion of private interests by the market mechanism, these reduced private interests will also be transformed into public interests under the influence of institutional rules, thus promoting the improvement of social benefits and finally achieving the compatibility of fairness and efficiency. Furthermore, this paper analyzes the internal mechanism of transforming private interests into public interests by using the institutional design of "market under institution". In this process, without losing the role of the government, the market is not losing its efficiency, the combination of promising government and effective market is realized, and the balance between public interests and private interests is achieved in the governance of the rural commons.
Keywords: Market mechanism; Government; Institutions; Collective Action; Rural Living Environmental Governance
