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🪵 The Threshold

Private legal systems can rival state law when reputation functions as enforcement.

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tagsja-picks, xref, define, definitional_content, primary_study, singleton, category/definitional-content
aliases@bernstein_opting_1992, loc. 16

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Private legal systems can rival state law when reputation functions as enforcement.

Evidence

Although many of the shortcomings in the American legal system that make litigation unattractive to diamond dealers are also present in most commercial contexts, the diamond industry is unique in its ability to create and, more important, to enforce its own system of private law. Sections IVD and E focus on the ways the industry’s organization facilitates the creation of strong reputational bonds, which the bourse’s arbitration system in turn uses to enforce its judgments. They examine two types of reputation-bond-based extralegal contractual regimes: the homogeneous group regime that is generally associated with repeat transactions among members of small geographically concentrated and ethnically homogeneous groups, and the information-intermediary regime in which technology links markets and secures the rapid and low-cost dissemination of information about reputation. Although the industry is currently moving from a homogeneous group to an information-intermediary-based regime, it has succeeded, at least for the time being, in creating an overarching system that captures the advantages of both regimes. — Lisa Bernestein, Opting out of the Legal System, 16

Categorization

  • XREF: Defines two reputation-bond regimes that map directly onto Coleman’s network closure — the homogeneous group is dense closure, the information-intermediary is the weak-tie/structural-holes alternative. Directly relevant to the reader’s framework. — connects to: Private self-regulators can beat external regulators on knowledge and trust. — Shapiro, Susan P., The Social Control of Impersonal Trust, 118; A private tribunal can enforce judgments through instantaneous reputational publicity. — Lisa Bernestein, Opting out of the Legal System, 238; Reputation can substitute for legal enforceability in evaluating contracts. — Lisa Bernestein, Opting out of the Legal System, 213 (+18 more)
  • DEFINE: Defines the homogeneous group regime vs. information-intermediary regime distinction, the conceptual core of the extralegal-contracts literature.

Broader Connections

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