Informal trust norms once governed the repo market in place of legal contracts

Evidence

“The lack of concern that money market people displayed about dotting [sic] the legal i’s and is with respect to repo reflected … their notion that they were afforded much protection by the standards of the business in which they operated. Money market folk have always felt, at least until recently, that they are in a business in which people say My word is my bond' and mean it; a business in which, if someone says something is done,’ it is done.” (Stigum 1989, p. 218) It should be noted that “repo” has uses quite other than those discussed above. — Donald MacKenzie, An Engine, Not a Camera, 1295

Categorization

• XREF: Parallels the reputation-based extralegal contracting systems described in the Milgrom law-merchant literature and the diamond bourse case — same logic of community norms substituting for formal law. — connects to: Much apparent contractual dealing is actually regulated by informal trust devices — Russell Hardin, Trust and Trustworthiness, 840; Trust discourse is not inherently legalistic despite contractual language — Diego Gambetta, Trust - Making and Breaking Cooperative…, 797; Repo transactions lacked a legal definition until the 1980s — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1294
• DEEPTHINKING: This is the ‘word is bond’ ethos as an institutional fact about a market built on immense leverage — a compressed, vivid instance of how trust substitutes for contractual form. Strong evidence for the performativity thesis that markets are social institutions, not just price mechanisms.
• ADDENDUM: Relates to ‘On Sacrifice’ loosely as trust-as-social-glue, but more precisely echoes the law-merchant theme in my library: reputation-based enforcement replacing courts.

Broader Connections

• Much apparent contractual dealing is actually regulated by informal trust devices #corroborates (0.90) — Russell Hardin, Trust and Trustworthiness, 840
• Trust discourse is not inherently legalistic despite contractual language #corroborates (0.85) — Diego Gambetta, Trust - Making and Breaking Cooperative…, 797
• Repo transactions lacked a legal definition until the 1980s #expands (0.75) — Donald MacKenzie, An Engine, Not a Camera, 1294