In the early stock market in London there were substantial risks of non-payment and fraud. (Mortimer, 1801) According to Hobbesian theory, we would expect stock markets to develop only after government has implemented rules and regulations to eliminate these problems. The historical account,...

It is often argued that government rule enforcement is necessary for the development of a stock market (Glaeser, Johnson, & Shleifer, 2001). Work by Boot, Stuart, and Thakor (1993), Klein and Leffler (1981), and Telser (1980), however, suggests that repeated interaction and reputation can create...