How do societies control trust relationships that are not embedded in structures of personal relations? This paper discusses the guardians of impersonal trust and discovers that, in the quest for agent fidelity, they create new problems. The resulting collection of procedural norms, structural constraints, entry restrictions, policing mechanisms, social-control specialists, and insurance-like arrangements increases the opportunities for abuse while it encourages less acceptable trustee performance. Moreover, this system sometimes leads people to throw good "money" after bad; they protect trust and respond to its failures by conferring even more trust. The paper explores the sources and consequences of the paradox that the guardians of trust are themselves trustees.

The Social Control of Impersonal Trust

This paper explores the ramifications of introducing administered contracts -- long term, collective contractual relationships -- into economic analysis with attention being focused on the implicit regulatory contract. The perspective afforded by the administered contracts framework suggests that the economist's case against regulation has been overstated. Many of the problems associated with regulation lie in what is being regulated, not in the act of regulation itself. Further, many of the perceived failures of regulation (for example, entry restrictions) can be seen to have a plausible efficiency rationale.

Regulation and Administered Contracts

Vertical integration is a fundamental corporate strategy of interest to the fields of strategic management and organizational economics. This paper synthesizes theoretical arguments and empirical findings from this literature to identify the underlying advantages and disadvantages of choosing vertical financial ownership relative to vertical contracts. It then suggests that in the absence of agency and transaction costs, vertical financial ownership and vertical contracting are equivalent governance structures for achieving corporate objectives. However, given a world of positive agency and transaction costs, the key theoretic question then becomes predicting when market mechanisms are sufficient, when intermediate forms of vertical contracting become necessary, and when vertical financial ownership becomes the preferred governance structure. The concluding section of the paper provides a framework for making this analysis based on a synthesis of agency and transaction costs perspectives.

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The choice of organizational form: Vertical financial ownership versus other methods of vertical integration

(1998). Legal Culture and Transformative Constitutionalism. South African Journal on Human Rights: Vol. 14, No. 1, pp. 146-188.

Legal Culture and Transformative Constitutionalism

Innovations in networked digital communications technologies, including the rise of “Big Data,” ubiquitous computing, and cloud storage systems, may be giving rise to a new system of social ordering known as algorithmic regulation Algorithmic regulation refers to decisionmaking systems that regulate a domain of activity in order to manage risk or alter behavior through continual computational generation of knowledge by systematically collecting data (in real time on a continuous basis) emitted directly from numerous dynamic components pertaining to the regulated environment in order to identify and, if necessary, automatically refine (or prompt refinement of) the system's operations to attain a pre-specified goal This study provides a descriptive analysis of algorithmic regulation, classifying these decisionmaking systems as either reactive or pre-emptive, and offers a taxonomy that identifies eight different forms of algorithmic regulation based on their configuration at each of the three stages of the cybernetic process: notably, at the level of standard setting (adaptive vs fixed behavioral standards), information-gathering and monitoring (historic data vs predictions based on inferred data), and at the level of sanction and behavioral change (automatic execution vs recommender systems) It maps the contours of several emerging debates surrounding algorithmic regulation, drawing upon insights from regulatory governance studies, legal critiques, surveillance studies, and critical data studies to highlight various concerns about the legitimacy of algorithmic regulation

Algorithmic regulation: A critical interrogation

WAith the development of a free enterprise system based on an unheard of division of labor, capitalistic society needed a highly elastic legal institution to safeguard the exchange of goods and services on the market. Common law lawyers, responding to this social need, transformed "contract" from the clumsy institution that it was in the sixteenth century into a tool of almost unlimited usefulness and pliability. Contract thus became the indispensable instrument of the enterpriser, enabling him to go about his affairs in a rational way. Rational behavior within the context of our culture is only possible if agreements will be respected. It requires that reasonable expectations created by promises receive the protection of the law or else we will suffer the fate of Montesquieu's Troglodytes, who perished because they did not fulfill their promises. This idea permeates our whole law of contracts, the doctrines dealing with their formation, performance, impossibility and damages. Under a free enterprise system rationality of the law of contracts has still another aspect.1 To keep pace with the constant widening of the market the legal system has to place at the disposal of the members of the community an ever increasing number of typical business transactions and regulate their consequences. But the law cannot possibly anticipate the content of an infinite number of atypical transactions into which members of the community may need to enter. Society, therefore, has to give the parties freedom of contract; to accommodate the business community the ceremony necessary to vouch for the deliberate nature of a transaction has to be reduced to the absolute minimum. Furthermore, the rules of the common law of contract have to remain Jus dispositivum-to use the phrase of the Romans; that is, their application has to depend on the intention of the parties or on their neglect to rule otherwise. (If parties to a contract have failed to regulate its consequences in their own way, they will be supposed to have intended the consequences envisaged by the common law.) Beyond that the law cannot go. It has to delegate legislation to the contracting parties. As far as they are concerned, the law of contract has to be of their own making.

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Contracts of Adhesion-Some Thoughts About Freedom of Contract

The common law appears to have no counterpart to the German doctrine of culpa in contrahendo: that contracting parties are under a duty, classified as contractual, to deal in good faith with each other during the negotiation stage, or else face liability, customarily to the extent of the wronged party's reliance. In this comparative study Professor Kessler and Mrs. Fine find, however, that notions of good faith and fair dealing are frequently expressed in the American contract law affecting preliminary negotiations, firm offers, mistake, and misrepresentation, and that the doctrines of negligence, estoppel, and implied contract, among others, have at the same time served many of the doctrinal functions of culpa in contrahendo.

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Friedrich Kessler

Papers

Contracts of Adhesion-Some Thoughts About Freedom of Contract

Culpa in Contrahendo, Bargaining in Good Faith, and Freedom of Contract: A Comparative Study

Automobile Dealer Franchises: Vertical Integration by Contract

Competition, Contract, and Vertical Integration

Contracts Cases And Materials