This article has been largely devoted to offering explanations of why the diamond industry has long relied on the extralegal enforcement of its business norms. By a variety of reputational bonds, customary business practices, and arbitration proceedings, the diamond industry has developed a set of rules and institutions that its participants find clearly superior to the legal system. The industry, as it has been traditionally organized, is able to make and, more important, enforce its own rules. The market is organized to promote the low cost and rapid intraindustry dissemination of information about reputation, which enables it to use reputation bonds to create intraindustry norms that function as a deterrent to breach of contract and a private sanctioning system whose judgments can almost always be enforced completely outside the legal system.

XREF: Connects to theories of private ordering and Ostrom's work on self-governance of common-pool resources.

Lisa Bernestein, Opting out of the Legal Sys…, loc. 283