Trust Me On This One

Think about how often you depend on the kindness trust of strangers. You can walk into a restaurant, order the most expensive item on the menu and leisurely eat it without offering up any sort of collateral. The restaurateur may not know you, but he trusts you. Similarly, you can walk into a New York City hotel, put down a credit card and spend a week in the lap of luxury. The hotel doesn’t know you, but they know your credit card and extend their trust in Visa to you.

Like money, trust lubricates the wheels of commerce. It allows us to do business with people we’ve never met, expanding the “extent of the market,” and our standard of living. Indeed, as Steve Knack, senior economist at the World Bank, sees it: “If you take a broad enough definition of trust, then it would explain basically all the difference between the per capita income of the United States and Somalia.”

Why is it that strangers in the United States are so much more willing to trust one another compared with strangers in Somalia? More importantly: how can we build trust in places where it is lacking? Studies have found that humans have some rather ugly rules of thumb when it comes to trust. They are more likely to trust others if they are perceived as high status or if they are of the same race. That doesn’t offer much in the way of helpful policy advice for building trust.

But new research by Omar Al-Ubaydli, Daniel Houser, John V. Nye, Maria Pia Paganelli and Xiaofei Pan points to another trust-builder: experience with markets. They write:

In randomized control laboratory experiments, we find that those primed to think about markets exhibit more trusting behavior. We randomly and unconsciously prime experimental participants to think about markets and trade. We then ask them to play a trust game involving an anonymous stranger. We compare the behavior of these individuals with that of a group who are not primed to think about anything in particular. Priming for market participation affects positively the beliefs about the trustworthiness of anonymous strangers, increasing trust.

Progress depends on the extent of the market, the extent of the market depends on trust, and trust can be facilitated with familiarity with markets.