Trust

Trust

Forms, Foundations, Functions, Failures and Figures

Bart Nooteboom

Trust deals with a range of questions such as: what are the roles of trust? What can we trust in? Can trust serve as an instrument for the governance of relations? Is trust a substitute, a precondition or an outcome of contracts? The author then goes on to analyse what trust is based on, what its limits are, how it grows and how it can also break down. The role of intermediaries is also discussed.

Chapter 5: Failures

Bart Nooteboom

Subjects: economics and finance, economic psychology, industrial organisation

Extract

Earlier chapters indicated that trust may fail. It has its errors and pathologies, in both lack and excess of trust. This is further discussed in the first part of this chapter. Pathologies of trust have implications for economic systems. Those are discussed in the second part. The question for this chapter is: Question 9: Failures of trust How can trust go wrong? What are its possible adverse effects? What are the limitations and boundaries of trust? 5.1 ERRORS OF TRUST First I look at errors of trust on the level of individual people and organizations. A question before I start discussing pathologies is the following: from whose perspective is it a pathology? If people make themselves vulnerable by large trust, who is to judge that this is excessive? Of course, this is up to the individual. However, without committing oneself to full-fledged economic determinism, one can reasonably speak of what is risky from the perspective of the survival of the firm, depending on the intensity of competition. Blind, unconditional trust is excessive in the sense that it entails a large risk of economic and possibly also psychological damage, and a possible threat to survival of the firm. If for reasons of conviction or mission one goes ahead anyway, that is a respectable choice. However, as we shall see, excess of trust and suspicion may be due to psychological or organizational problems, which, when recognized, may be seen as undesirable and in need of remedy. Pathologies and Errors As...

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