Arnold Kling states:
I am not claiming that private governance in the absence of government support is impossible. I am claiming that it is costly.
Does anyone claim that private governance in the absence of government support costs nothing? Governance is a function and all functions have some costs. The problem with government by a State is that it is a coercive monopoly, which usually implies high costs and risks, low quality and much corruption.
Kling then gives a poor hypothetical example:
Take an example of a complex economic activity that involves a lot of specialization and trade. The famous pencil, or a toaster, or an I-phone. The parties involves in the process of assembling such goods involves do not know one another. They cannot gauge reputations, nor can they even know whether other parties care about their reputations.
Maybe Kling means that parties do not know all other parties involved in these complex processes: this is true because it would be very difficult; but it is completely unnecessary. Parties know (as well as is efficient and possible) the parties they directly interact with: their providers and their clients. They need to trust the quality of the products and services bought, and that they will be delivered in time, and if they extend credit to customers they need to know their solvency. This knowledge is always imperfect, but it is not zero.