Trust: No Economy, Money, Business Without It

The market and its price mechanism - critically depends on trust. If people do not trust each other, or the economic "envelope" within which they interact (“preemptive mistrust”), economic activity gradually grinds to a halt.

There is a strong correlation between the general level of trust and the extent and intensity of economic activity. Francis Fukuyama, the political scientist, distinguishes between high-trust and prosperous societies and low-trust and, therefore, impoverished collectives. Trust underlies economic success, he argued in a 1995 tome.

Trust is not a monolithic quantity. There are a few categories of economic trust. Some forms of trust are akin to a public good and are closely related to governmental action or inaction, the reputation of the state and its institutions, and its pronounced agenda. Other types of trust are the outcomes of kinship, ethnic origin, personal standing and goodwill, corporate brands and other data generated by individuals, households, and firms. Such information creates two types of output: reinforced trust (where behaviour matches expectations) and “inductive distrust” (where behaviour frustrates expectations).

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