Institutions exist to block the destructive tail risks of interacting with the untrustworthy

Evidence

Much of our ability to trust others on ordinary matters of modest scope depends on having institutions in place that block especially destructive implications of untrustworthiness. Indeed, this is, in different vocabulary, Hobbes’ argument for government and submission to it (Hobbes 1968 , 2.30: 376–94). If the potential losses of interacting with others are always high, our interactions are like prisoner’s dilemmas in which the loss payoff for one who cooperates while the other defects is very large, so that the prospective loss trumps the gains even of several successful cooperations in repeated play. In such games, we may not ever be able to initiate joint cooperation and may therefore never enter into repeated play. — Russell Hardin, Trust and Trustworthiness, 511

Categorization

• XREF: Connects directly to the reader’s Hardin/Luhmann integration: this is the institutional scaffold that makes ordinary trust feasible, and Luhmann’s ‘familiarity’ is precisely what such institutions underwrite. Also echoes the prisoner’s-dilemma framing from the Milgrom trade-institutions material. — connects to: Clearinghouse mutualization makes a single member’s failure a system-wide contagion risk.; Institutions designed for worst-case knaves may actively corrupt virtuous people. — Philip Pettit, Republicanism: A Theory of Freedom and…, 950; Anti-domination institutions must remove power, not just reduce harm probability — Philip Pettit, Republicanism: A Theory of Freedom and…, 371