Even global markets rest on personal trust networks in crises
Evidence
The resolution of the crisis shows something of the little-understood network of personal interconnections that often underpins even the most global and apparently impersonal of markets. The Merc’s salvation was, as we have seen, a verbal agreement among three people who knew and trusted each other. What eased Tuesday’s panic was likewise often quite personal. Senior officials from the Federal Reserve telephoned top bankers and stockbrokers, pressuring them to keep extending credit and not to hold back from settling transactions with firms that might be about to fail. Those to whom they spoke generally did what was asked of them. Bankers telephoned their corporate clients to persuade them to announce programs to buy back stock (First Boston, for example, called some 200 clients on Tuesday morning), and enough of their clients responded to help halt the plunge in stock prices. — Donald MacKenzie, An Engine, Not a Camera, 29
Categorization
- XREF: Connects to the trust/reputation literature (Milgrom law merchant, Gambetta trust essays) also on this shelf: informal networks underpin putatively formal market institutions. — connects to: Global impersonal markets rest on personal trust and telephone networks; Economic institutions depend on personal networks that generate trust and enforce norms — Coleman, SocialCapitalCreation-1988, 28; Markets can organize exchange without requiring high levels of trust (+2 more)
Broader Connections
- Global impersonal markets rest on personal trust and telephone networks
#corroborates(0.95) - Economic institutions depend on personal networks that generate trust and enforce norms
#expands(0.80) — Coleman, SocialCapitalCreation-1988, 28 - Institutionalized money trust replaces countless individual acts of personal trust
#qualifies(0.75) - Markets can organize exchange without requiring high levels of trust
#contradicts(0.72) - Complex social systems cannot rest on individual feeling-based trust alone
#qualifies(0.72) — Niklas Luhmann, Trust and Power, 290