Understanding trust: The role of false consensus
Jeffrey V. Butler, Paola Giuliano, Luigi Guiso, 18 December 2012
Trust among strangers is at the heart of well-functioning market economics. This column argues that individual trust beliefs are related to individual trustworthiness, which in turn is related to the values parents transmit to their children. It adds that if someone forms trust beliefs about unknown people by attributing to others his own trustworthiness, he is bound to make mistakes by being either too naïve or too wary.
Every day millions of people deal with others they know nothing or very little about. A Norwegian tourist buys a carpet in Casablanca. A woman in Mexico City hails a cab on the street. A person with a never-before-experienced eye pain asks an ophthalmologist for advice.
Topics: Frontiers of economic research
Tags: Culture, false consensus, trust
Crisis and public support for the euro
Felix Roth, Lars Jonung, Felicitas Nowak-Lehmann, 5 November 2012
The Eurozone crisis has meant slow growth, rising unemployment, and social unrest. This column gauges the impact of all this on European citizens‘ opinions about the euro and EU institutions. Using Eurobarometer surveys, the authors find that, within the Eurozone, the crisis has only marginally lowered support for the euro but has led to a sharp fall in public trust in the ECB.
The euro is a unique currency in at least two ways. It is the first time that a group of democratic countries have abolished their national currencies and replaced them with a single currency that is managed by a common central bank, the ECB. The euro is also unique in that data on public attitudes towards the euro have been collected for more than 20 years (Eurobarometer 2012).
Topics: EU institutions, Europe's nations and regions
Tags: euro, Eurozone crisis, public opinion, trust
Teaching practices and social capital
Yann Algan, Pierre Cahuc, Andrei Shleifer, 24 October 2011
Can trust be taught in the classroom? The authors of CEPR DP8625 present evidence that progressive or 'horizontal' teaching methods can help children develop beliefs that reinforce social capital, with broad benefits for society and the economy overall.
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Tags: education, interpersonal cooperation, progressive eduction, social capital, teaching practices, trust
How the long-gone Habsburg Empire is still visible in Eastern European bureaucracies today
Sascha O Becker, Ludger Woessmann, 31 May 2011
For centuries, Europe was ruled by empires wielding global influence. This column shows that these empires can leave behind a long-lasting legacy through cultural norms. Comparing individuals on opposite sides of the long-gone Habsburg Empire border within five countries, it shows that firms and people living in what used to be the empire have higher trust in courts and police.
Nobel laureate Elinor Ostrom emphasised that trust in the key institutions of the state, and their proper functioning, is crucial in facilitating collective action (Ostrom 1998). The courts and the police as the enforcers of rules in collective action have a crucial role to play in supporting trust in interactions between citizens and the state.
Topics: Economic history, Europe's nations and regions, Frontiers of economic research, Institutions and economics
Tags: Corruption, economic institutions, Habsburg Empire, trust
How to rebuild trust
Gilles Saint-Paul, Giancarlo Corsetti, John Hassler, Luigi Guiso, Hans-Werner Sinn, Jan-Egbert Sturm, Xavier Vives, Michael P. Devereux, 21 March 2010
Public distrust of bankers and financial markets has risen dramatically with the financial crisis. This column argues that this loss of trust in the financial system played a critical role in the collapse of economic activity that followed. To undo the damage, financial regulation needs to focus on restoring that trust.
For all its mathematical models, finance is not physics. In fact, it runs pretty much on faith (Carlin et al. 2009), and can give rise to highly emotional reactions. This was much in evidence during the latest financial crisis.
Topics: Financial markets
Tags: financial regulation, global crisis, trust
To trust or not to trust: The answer lies somewhere in the middle
Paola Giuliano, Luigi Guiso, Jeffrey V. Butler, 8 October 2009
Virtually every commercial transaction involves trust, and more trusting societies tend to be richer. But does it pay individuals to trust? This column suggests that relationship between trust and income is not always increasing but is instead hump-shaped. Individuals that mistrust too much tend to miss profitable opportunities, while those who are too trusting are cheated abnormally often.
On June 2009, Bernie Madoff was condemned to 150 years in prison for what federal agents have described as one of the biggest Ponzi scheme in history, which could leave investors with billions in losses. Swindlers like Mr Madoff are not new in history. Think about Mr Ponzi himself, or the Victorian example of Mr Merdle in Charles Dickens’ Little Dorrit.
Topics: Frontiers of economic research
Tags: Culture, trust
The crisis and citizens’ trust in central banks
Daniel Gros, Felix Roth, 10 September 2009
Most observers agree that central banks can claim partial credit for the stabilisation that have been achieved and the prospect of a recovery. This column warns that the general public seems to hold a completely different opinion; trust in central banks has declined and the reaction of central banks to the crisis is generally judged as unsatisfactory. Central bankers all over the world should redouble their efforts to regain the trust of the people towards their institution.
Central banks seem to be enjoying a “good crisis”. They have lowered interest rates to near zero and used unconventional approaches to stabilise financial systems.
Topics: Macroeconomic policy
Tags: Central Banks, trust
Competition builds trust
Patrick Francois, Thomas Fujiwara, Tanguy van Ypersele, 27 August 2009
Recent research argues that culture affects economic outcomes. Do markets instil cultural values that support good outcomes? This column provides evidence that more competitive markets raise employees’ trust levels. That suggests that competitive markets build the values that support them.
Recent empirical evidence gleaned from a number of different sources and countries using different methods plausibly suggests that culture affects economic outcomes (see Tabellini 2008 for a recent survey).
Topics: Competition policy, Institutions and economics
Tags: Culture, monopolistic competition, trust
Social attitudes and economic development: an epidemiological approach
Yann Algan, Pierre Cahuc, 2 October 2007
What are the fundamental causes of differences in income per capita across countries? Although there is still little consensus on the answers to this question, it is often argued that social attitudes such as trust are one of the main determinants of economic development.
What are the fundamental causes of differences in income per capita across countries?
Tags: economic development, social attitudes, trust