Generalised trust beyond kin lowers transaction costs and permits large-scale organisation without formal enforcement.
Fukuyama's 1995 argument. Trust that extends only to kin caps organisational size at what a family can staff, which is his explanation for the different industrial structures of Italy, China and Germany.
In practice
- A firm that can subcontract to strangers on a handshake operates at a scale that one requiring family members cannot reach.
- A market where every transaction needs a guarantor known to both sides is limited to the size of the guarantor network.