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Keynes, Uncertainty and the Global Economy

Beyond Keynes, Volume Two

Edited by Shelia C. Dow

The revival of interest in Keynesian economics since the late 1980s reinstates the importance of Keynes’s contribution to economic theory and policy. This is the second of two volumes in which authoritative contributions are presented by an outstanding group of international experts to celebrate Keynesian economics, and to review and further the developments of post Keynesian economics of recent years.
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Chapter 6: Trust, time and uncertainty

Vicky Allsopp


Vicky Allsopp1 INTRODUCTION This chapter aims to examine the nature and significance of trust in economic relationships, whether in market or non-market transactions – indeed, in brief or protracted economic encounters. Here an emphasis is placed on the relevance of different conceptual treatments of time, and the related ideas of knowledge, ignorance and uncertainty for emphasizing and explaining the importance of trust. Trust has not featured conspicuously on the conventional economic agenda. Whilst Adam Smith (1776) recognized trust as a valuable asset and had no qualms about highlighting the role of trust in determining wage differentials, many economists completely overlook trust. Smith (1776: 66) clearly stated that, in settling the wages of a principal clerk, ‘some regard is had commonly, not only to his labour and skill, but to the trust which is reposed in him’. Trust had an important function. Although trust has been afforded a notable place in game theory, and wider discussions of trust have developed amongst economists in recent years (with contributions, for example, from Casson, 1991, 1995; Williamson, 1993; Fukuyama, 1995), economists, by and large, have ignored the concept. This is a significant omission, particularly as it can be argued that trust, or its absence, is important for explaining economic behaviour, economic outcomes and the effectiveness of economic policy. Indeed, whether the claim is that ‘[t]rust is central to all transactions’ (Dasgupta, 1988: 49) or simply that there is a component of trust in every transaction, in this account...

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