---
entity_slug: bank_market_discipline
evaluator: null
evaluated_at: '2026-02-23T00:42:50.053958'
overall_score: 4.6
scores:
- name: definition_precision
  value: 4.0
  max_value: 5.0
  rationale: The definition clearly identifies specific market mechanisms (note redemption
    threats, competition, consequences of imprudent lending) that create disciplinary
    effects on banks. It avoids circularity and captures a distinct regulatory concept
    that operates through market forces rather than formal oversight.
- name: source_grounding
  value: 5.0
  max_value: 5.0
  rationale: This concept is well-grounded in Smith's actual discussion of banking
    in Book II, Chapter 2, where he explicitly argues that market forces naturally
    discipline banks and can be more effective than formal regulation. The specific
    mechanisms mentioned (note redemption, competition) are directly from Smith's
    analysis.
- name: domain_placement
  value: 5.0
  max_value: 5.0
  rationale: The "Regulation" domain assignment is precisely correct, as this entity
    describes a regulatory mechanism that operates through market forces rather than
    government intervention. It fits perfectly within Smith's broader framework of
    how markets can self-regulate economic activity.
- name: vsm_relevance
  value: 4.0
  max_value: 5.0
  rationale: This entity maps well to S2 (coordination/anti-oscillation) as it describes
    mechanisms that prevent banking system instability, and partially to S3 (internal
    regulation) as market discipline functions as a form of systemic audit. The regulatory
    nature gives it clear VSM relevance rather than being abstractly neutral.
- name: explanatory_value
  value: 5.0
  max_value: 5.0
  rationale: "This entity illuminates a crucial mechanism in Smith's economic theory\u2014\
    how market forces can provide regulatory discipline without formal government\
    \ intervention. It explains the structural relationship between competitive pressures\
    \ and prudent banking behavior, offering genuine insight into market self-regulation."
---

# Evaluation: Bank Market Discipline

## definition_precision — 4.0 / 5.0

The definition clearly identifies specific market mechanisms (note redemption threats, competition, consequences of imprudent lending) that create disciplinary effects on banks. It avoids circularity and captures a distinct regulatory concept that operates through market forces rather than formal oversight.

## source_grounding — 5.0 / 5.0

This concept is well-grounded in Smith's actual discussion of banking in Book II, Chapter 2, where he explicitly argues that market forces naturally discipline banks and can be more effective than formal regulation. The specific mechanisms mentioned (note redemption, competition) are directly from Smith's analysis.

## domain_placement — 5.0 / 5.0

The "Regulation" domain assignment is precisely correct, as this entity describes a regulatory mechanism that operates through market forces rather than government intervention. It fits perfectly within Smith's broader framework of how markets can self-regulate economic activity.

## vsm_relevance — 4.0 / 5.0

This entity maps well to S2 (coordination/anti-oscillation) as it describes mechanisms that prevent banking system instability, and partially to S3 (internal regulation) as market discipline functions as a form of systemic audit. The regulatory nature gives it clear VSM relevance rather than being abstractly neutral.

## explanatory_value — 5.0 / 5.0

This entity illuminates a crucial mechanism in Smith's economic theory—how market forces can provide regulatory discipline without formal government intervention. It explains the structural relationship between competitive pressures and prudent banking behavior, offering genuine insight into market self-regulation.
