Information and trust as social aspects of credit

According to mainstream economic theory the contractual relationship between borrower and lender is characterized by asymmetry of information regarding the project to be financed. It is assumed that trust among credit participants is constructed individually as they collect and assess requisite information. In contrast, this paper argues that trust and information among credit participants have compelling social constituents that depend on economic function and social context. More specifically, the paper shows that financial institutions transform trust into a social and objective relationship. The capitalist credit system comprises a set of institutions that construct trust socially by using increasingly general information. Nonetheless, the foundation of credit-related trust is the ability to repay money. Hence the moral content of credit is thin, giving rise to fraud and deception.

Keywords

• credit,
• trust,
• information,
• trade credit,
• banking credit,
• money market,
• central banking,
• credit system