Trust Is Economically Important

If you have not already done so, go read Constant's post.

"Trust" as a concept is not as simple as it first appears. What exactly is "trust"? Is the shopkeeper who leaves the coolers unlocked trusting me, or has she placed her trust somewhere else?

The answer to the first question is something along the lines of "a belief that given a set of circumstances, an actor will perform a given action". There are three concepts (or variables) within this definition. We have our estimate of a probability, we say we "trust" when we think the probabilities of an action by an actor exceed some threshold. Then we have the actor, which may or may not actually be a person; it may also be some set of people, an inanimate object, or an abstract concept. Finally we have the expected action, anything the actor might be capable of. And not only that, but trust can also be composed of other trust relationships.

For the second question, what is the shopkeeper trusting when she leaves the coolers unlocked? I seriously doubt she is trusting the particular individual Joe Sixpack who just walked in. More likely she is trusting a combination of inanimate objects, a large set of people, and some abstract concepts. She has placed trust in security systems, such as the store layout that encourages people to pass by the cash register on the way out, mirrors that allow her to see down many aisles at a time, and the securty cameras. She trusts that most people will not steal. She trusts the legal institutions - law, police, and courts to come to her aid and punish thieves. Finally, what she really trusts is that the interactions between the customers, security systems and legal system mean that the few theft losses she does incur are an acceptable cost of business.

Trust in specific people probably does not matter as much as having trustworthy institutions.

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That was actually my point

Actually, the reason that I have for wondering whether trust in the intrinsic honesty (by which I mean honesty controlling for environmental factors such as the presence of surveillance) of other individuals is all that important, is that we can find or create substitutes - surveillance and so on - which are not, I think, prohibitively expensive in many cases. I interpreted the cell phone study as deliberately controlling for environmental variables so as to minimize the direct impact of honesty-substitutes (environmental honest-behavior elicitors) such as surveillance, so as to expose variations in the intrinsic honesty of individuals.

It could be that, as your comments have made me ask myself, I've misunderstood the point of the talk about the economic importance of trust. To say that "I trust someone as far as I can throw a stick" is I think a joke, which really means "I don't trust him". So a society in which we "trust" people only because they're within range of our sticks (our honest-behavior-eliciting institutions), is not what I would consider a "trusting" society. But that's just language, and it could be that the economists who talk about the importance of trust really do just mean the importance of honest-behavior-eliciting institutions.