In the fourth part of the Trust in Me series, Ellie Thompson discovers the literary theories surrounding the measurement of social capital.
In economic literature the concept of trust has multiple interpretations. Larue Hosmer conducted the most expansive analysis of this topic to date, and states that trust is “the reliance by one person, group, or firm upon a voluntarily accepted duty on the part of another person, group, or firm to recognize and protect the rights and interests of all parties engaged in a cooperative endeavour or economic exchange”.
As such, trust is defined as a behaviour in which an individual, or a trustor, places resources at the disposal of another party, or a trustee. The expectation is that the act will pay off the trustor’s goals. To that end, if the trustee is a trustworthy entity then the trustor is better off than if trust had not been placed. Therefore trust has, in certain markets, an economic benefit. This concept has been explored in empirical studies aiming to measure social capital within pairs and groups, such as the ‘Gift Exchange Game’ (Fehr et Al) and the ‘Trust Game’ (Berg et Al). In these studies the necessity of the trustor to make themselves vulnerable to the trustee’s actions captures the essence of trust, altruism and reciprocity in an economic remit.
In Social image and the 50-50 norm: a theoretical and experimental analysis of audience effects (2009), Andreoni and Bernheim conducted an empirical research investigation into how giving between friends is also affected by visibility. They made donors donate while being observed by an audience, analysing the suppression and exertion of altruistic behaviour displayed. Findings indicated that when a trustee felt there was the potential to be judged by their peer-to-peer social network, they donated more. In addition to this, Andreoni and Rao (2011) conducted a follow up investigation into the power of asking directly. This found that when a trustor was allowed to speak, giving behaviour increased.
In this context it must be noted that critiques exist around the generalised, blanket application of theories on the economics of trust, suggesting other significant determinants are at work, such as the effects on trust of religious beliefs, ethnic and cultural trust differences, and also factors of economic inequality.