What Is the Benefit of Formal, Rule-Based, Impersonal Exchange with Third-Party

question 74

Essay

What is the benefit of formal, rule-based, impersonal exchange with third-party enforcement (often termed arm's-length transaction) versus informal institutions? Why can't we assume that formal institutions are inherently better than informal ones? How do formal and informal institutions complement each other?

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Definitions:

Sub-Par

A term indicating something is below an expected level of quality, performance, or standard.

Directors And Officers

Individuals appointed or elected to oversee and manage a corporation or organization and make strategic decisions.

Criminal Behavior

Actions that violate laws and are punishable by the government, including felonies and misdemeanors.

Responsible Person Doctrine

A legal principle that holds an individual personally liable for unpaid taxes or obligations of a business, based on the level of control or authority they have over the financial operations of the entity.