Enforceable contracts enable cooperation by limiting worst-case risks

Evidence

Let us unpack this claim. How can trust be enhanced by enforceable contract or by audits with the threat of sanction? The contract or audit may protect a relationship against the worst of all risks it might entail, thereby enabling the parties to cooperate on less risky matters. This is a milder and more specific variant of the central argument in Hobbes’ theory of political order. The threat of sanctions to protect each makes all better off. Hobbes’ sovereign enforces order in the protection of life and property. Once these are secured, we have less reason to be defensive, and we engage in productive investments and beneficial exchanges. — Russell Hardin, Trust and Trustworthiness, 254

Categorization

• XREF: This is the Hobbesian mechanism central to the reader’s stated integration: sanctions securing order unlocks productive exchange just as the sighted wife’s enforcement secures order in Saramago. — connects to: Risk-shifting contract terms trade against lower produce prices — Henry M. Hart, Jr. and Albert M. Sacks, The Legal Process: Basic Problems in…, 1597
• DEFINE: Clarifies how institutional-device trust enhancement works: risk capping, not moral improvement.