Trust functions as a lubricant that reduces economic transaction costs

Evidence

If transaction costs are thought of as friction in the economy, then trust can be seen as an extremely effective lubricant. To quote Arrow (1974: 23): ‘It saves a lot of trouble to have a fair degree of reliance in other people’s word.’ — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2522

Categorization

• DEFINE: The friction-lubricant model is the book’s central metaphor for what trust does to exchange.
• XREF: Friction/lubricant frames trust as a mechanism for lowering coordination cost, complementing the observability-constraints theme in Hardin and Luhmann. — connects to: Trusting communities enjoy economic and health advantages through lower transaction costs — Robert D. Putnam, Bowling Alone The Collapse and Revival…, 442
• corroborated: 2 independent passages support this claim — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2522