Study shows that trust drives successful market economies — but not in the way you may think
Researchers have found there is a strong correlation between trust and economic stability. ASU photo
From fueling our cars to fulfilling daily coffee habits, the average U.S. cardholder makes 251 credit card transactions per year, according to Capital One.
Each of these transactions are built upon a system of trust. As consumers, we trust that we will receive the goods and services we are paying for. Similarly, vendors trust that there is money behind the payment method consumers are using.
If the trust is betrayed on either end of the transaction, the parties trust that there is a recourse to make it right. Trust is the foundation of governed market economies like the U.S. — but if you had to define trust, could you?
It’s a question that John M. Anderies, a professor with ASU’s School of Human Evolution and Social Change, has been trying to answer for over a decade.
“There's quite a bit of work done on trust, but it's really difficult to quantify and study. What we do know is that trust is important in promoting collective action, providing public infrastructure and shared infrastructures. Trust is kind of the lubricant that enables people to collaborate and cooperate,” Anderies said.
A timely essay published in the Proceedings of the National Academy of Sciences, “Meltdown of trust in weakly governed economies,” co-authored by Anderies, Stephen Polasky, a professor of applied economics at the University of Minnesota, and Marten Scheffer, a professor of complex systems at Wageningen University, examines the complex interplay between trust and addressing global challenges.
Anderies said that he and his colleagues realized early on that defining trust in a tangible way would be difficult. So, the trio decided to think about its impact as a phenomenon rather than as a moral good.
What they discovered is that there is a strong correlation between trust and economic stability, community health and addressing global challenges, such as climate change.
One study that Anderies and his co-authors highlight is a 2022 study titled “Resilience of countries to COVID-19 correlated with trust.” The study, which looked at 150 countries in the wake of the first waves of the COVID-19 pandemic, found that one of the best predictors of a country’s capacity to reduce cases and deaths was the percentage of people who agreed with the statement “most people can be trusted.”
“Successful collective action enhances trust and enhances collective actions. There's a virtuous cycle there that you get into when society says, ‘Hey, we have a win here. We got together, and we fixed this problem. Hey, we can trust each other; we can work together as a team. Let's do it again,’” Anderies said.
While collaborative action and previous success thrive on trust, inequality can easily dismantle even a perceived strong foundation. According to the authors, governed market economies are prone to several factors that undermine the trust that they depend on: the intrinsic tendency for inequality to arise, modern media's inclination to incite reactions by amplifying perceived inequalities and the incentive to gain financial reward at the expense of others.
However, Anderies doesn't believe that inequality necessarily comes from malicious intent.
“People are interested in being a valued member of their community — I would say it's kind of an intrinsic human feature. In some communities, not only Western communities but lots of communities, value is related to your status and your status is related to your effectiveness at gathering resources. This creates potential for a runaway status competition,” Anderies said.
Nonetheless, runaway status competitions that widen the gap between the “haves” and “have-nots” erode trust and can cause a negative feedback loop that is difficult to exit.
“The kind of feeling we wanted to convey is that there's this interplay between trust and the economy, and it's a feedback structure. A loss of trust means less good governance, less capacity for collective action, collaboration and providing public infrastructure, which then decreases economic performance, which further erodes trust,” Anderies said.
So what happens when trust is destroyed? The authors suggest that the pendulum will inevitably swing in the other direction.
“At some point in the pendulum swing, there may be a revolution or revitalization that may push it back in the other direction towards a more representative democracy, where there's a higher level of shared wealth, social participation and informative media. More equality positively impacts trust, which positively impacts the economy, which then can feed into preserving a thriving democracy,” Anderies said.
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