This is part of a series of posts about the fictional economy of George R.R. Martin's Song of Ice and Fire, so nonfans may wish to ignore it, but the principles are applicable to the real world. Post 1 argues that House Tyrell is in fact richer than House Lannister, while Post 2 considers the Lannisters' investments in sovereign debt. Post 3 concerns the market for dragons. Post 4 is on the link between cold weather and economic equality.
A sophisticated modern economy depends heavily on legally enforceable contracts, which is why fancy lawyers get paid a lot of money. But no enterprise consists entirely of fully specified enforceable legal obligations. Instead, tacit understandings, customary practice, and handshake arrangements fill out the framework of legalisms. That's one reason hostile takeover firms can make money by violating tacit understandings. Also in low-trust environments you tend to see a proliferation of small firms, which saps productivity but offers a way of coping with the low-trust situation. And here in the United States I worry that trust is being eroded by rising inequality and an elite failure.
For a society such as that of the Seven Kingdoms of Westeros, with its very limited formal capacity for legal administration, the availability of trust and custom is even more important. But as we saw on last night's episode, sometimes the gains from a breach of trust can be temptingly large.
When considering this matter, I think it's worth saying that Robb Stark's actions are arguably even worse than Walder Frey's. Whether he broke his original promise out of a misguided sense of honor (as in the books) or simply true love (as in the show), he's actively undermining the key social and political institution of Westeros. Arranged marriages run afoul of modern sensibilities and strike us as cynical. Turning such a marriage aside for honor or love strikes as us idealistic if perhaps misguided. But that would be a mistake. Marriage contracts are the only means that the major houses of Westeros have for forming alliances and ending conflicts. Walder extracted a high price from the Starks in exchange for his assistance in crossing the river, but the Starks were asking a favor of considerable value. The coin that Walder demanded—marriage arrangements for his children—was absolutely the standard sort of exchange for major political favor. A world in which one house promises another house a marriage alliance and then turns its back on the promise on a whim is a world in which houses are going to be perpetually at war.
Walder's decision to respond to betrayal in kind is extreme. But tit-for-tat is a viable strategy in the iterated prisoner's dilemma and arguably represents a reasonable approach. We, with direct access to Stark/Tully perspectives, know that the Edmure Tully fallback marriage is a perfectly good-faith arrangement but the view from the Twins is not so clear. You really wouldn't want to elevate a new King who right from Day 1 is betraying not only the Iron Throne but also his own bannermen. If you squint at it right, you can see what Walder was thinking. By contrast, the betrayal committed by Roose Bolton is pure ambition and cynicism with no justification whatsoever.