Trust-based loose contracting requires expectations of stable long-term interaction.

Evidence

In the current transition to a market economy, the nations of the former Soviet Union are hampered by the lack of institutional and personal experience with enforceable contracts and also by the sadly rich experience with adversarial dealings, with their single “buyer” of the past. … Part of what makes such terms compelling to someone fulfilling the contract is expectations of long-term iterated interactions and reputational effects. In the early years of a transition, no one can have great expectations of the stability and longevity of contracting partners. Hence there is a strong incentive to focus on short-term profits rather than long-term benefits of building reputation, thus undercutting the transition. — Russell Hardin, Trust and Trustworthiness, 844

Categorization

• XREF: Directly mirrors Milgrom’s law-merchant finding that reputational enforcement sustains cooperation only given expectations of repeated dealings — the same mechanism failing here in the ex-Soviet transition.
• QUESTION: Does the transition literature empirically confirm that post-Soviet economies remained stuck in short-term, reputation-averse contracting? Worth chasing later.