Information and trust as social aspects of credit

Abstract

According to mainstream economic theory the contractual relationship between borrower and lender is characterised by asymmetry of information about 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. Mre specifically, the paper shows that financial institutions trasnform 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. Nevertheless, 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.