Trustworthiness cannot be communicated as objective market information.

Evidence

Despite their informational advantage, there are a variety of factors that limit brokers’ role in the market. Information about “trustworthiness,” unlike consumer credit information, is difficult to communicate in objective terms. What is ethical behavior to a thirtyyear-old dealer, may be an abhorrent business practice to a sixty-year-old dealer. (One Israeli dealer explained that within the bourse there are small trading groups whose members trade primarily among themselves. The groups are defined by their standards of what constitutes fair and ethical trading.) In addition, even when they participate in brokered transactions, the individual buyer and seller still have to acquire some information about the broker’s judgment and reputation. This task is cheaper, however, since it is less transaction specific. Once a dealer determines that a broker has good judgment, he has access to many other dealers whose reputations he need not inquire into directly. — Lisa Bernestein, Opting out of the Legal System, 135

Categorization

• XREF: Relates to the relational contracting / reputation literature and to Bernstein’s broader argument about extralegal enforcement in close-knit trade communities. — connects to: Trust belongs to knowledge, so it cannot be offered, demanded, or withheld; Trust as knowledge cannot be morally required — Russell Hardin, Trust and Trustworthiness, 373; Protection firms cannot be bought because reputation is non-transferable (+4 more)

Related

• Reputation can substitute for legal enforceability in evaluating contracts. (similarity 0.81)
• Bourses move reputational information as efficiently as goods (similarity 0.80)
• Intermediaries reduce reputational information costs in extralegal markets. (similarity 0.80)
• Costly information, not infrequent trade, is the core obstacle to honest exchange. (similarity 0.79)
• Trustworthy behavior requires some information cost, but imperfect information can suffice. (similarity 0.79)
• One can invest only in reputation, never directly in trustworthiness (similarity 0.79)

Broader Connections

• Trust belongs to knowledge, so it cannot be offered, demanded, or withheld #expands (0.85)
• Trust as knowledge cannot be morally required #expands (0.85) — Russell Hardin, Trust and Trustworthiness, 373
• Trust cannot be governed by clear-cut ethical instruction #expands (0.82)
• Protection firms cannot be bought because reputation is non-transferable #exemplifies (0.80)
• Trust cannot be demanded but only offered through vulnerability #expands (0.80)