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Handbook of Trust Research

Edited by Reinhard Bachmann and Akbar Zaheer

The Handbook of Trust Research presents a timely and comprehensive account of the most important work undertaken in this lively and emerging field over the past ten to fifteen years. Presenting a broad range of approaches to issues on trust, the Handbook features 22 articles from a variety of disciplines on the study of trust in both organizational and societal contexts. With contributions from some of the most eminent names in the field of trust research, this international collaboration is an imaginative and informative reference tool to aid research in this engaging area for years to come.
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Chapter 19: The Economics of Trust

Mark Casson and Marina Della Giusta


Mark Casson and Marina Della Giusta 1. Introduction Trust is widely recognized as an important component of a just society. It is less widely appreciated that trust also makes an important contribution to the economy. Trust not only improves the general quality of life, but improves productivity and economic performance too. Trust is an intangible asset. It is an important part of the invisible infrastructure, or social capital, of an economy (Putnam, 1993). The economic analysis of trust can inform a wide range of issues, which extend way beyond the traditional boundaries of economics as a subject area. This chapter presents an economic perspective on trust. It analyses trust from a rational action point of view, incorporating emotions into decision-making processes. It examines the costs and benefits of trust, and shows how they can be compared with each other. It distinguishes different forms of trust, and identifies the particular forms that normally confer the greatest benefit to the economy. It is sometimes suggested that economics has little to say about trust because issues relating to trust are excluded from the neoclassical general equilibrium (GE) model. This criticism is valid as far as it goes. It must be recognized, however, that the assumptions of the GE model are very strict compared with those which are required for rational action theory. It is rational action theory, rather than GE theory, which is the basis for this chapter. It is also useful to draw attention to a couple of...

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