Trusting communities enjoy economic and health advantages through lower transaction costs

Evidence

Members of a community that follows the principle of generalized reciprocity—raking your leaves before they blow onto your neighbors’ yard, lending a dime to a stranger for a parking meter, buying a round of drinks the week you earn overtime, keeping an eye on a friend’s house, taking turns bringing snacks to Sunday school, caring for the child of the crack-head one flight down—find that their self-interest is served, just as Hume’s farmers would both have been better off by sharing their labors. … When each of us can relax her guard a little, what economists term “transaction costs”—the costs of the everyday business of life, as well as the costs of commercial transactions—are reduced. This is no doubt why, as economists have recently discovered, trusting communities, other things being equal, have a measurable economic advantage. The almost imperceptible background stress of daily “transaction costs”—from worrying about whether you got back the right change from the clerk to double-checking that you locked the car door—may also help explain why students of public health find that life expectancy itself is enhanced in more trustful communities. A society that relies on generalized reciprocity is more efficient than a distrustful society, for the same reason that money is more efficient than barter. Honesty and trust lubricate the inevitable frictions of social life. — Robert D. Putnam, Bowling Alone The Collapse and Revival…, 442

Categorization

• XREF: Connects to the Milgrom law-merchant material on why institutions restore information costly to reputation systems; reciprocity as reputation mechanism with lower monitoring costs. — connects to: Trust functions as a lubricant that reduces economic transaction costs — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2522; Trust functions as social capital enabling collective purposes. — Russell Hardin, Trust and Trustworthiness, 399; Trust is a costly risky investment expecting future cooperation (+1 more)

Broader Connections

• Trust functions as a lubricant that reduces economic transaction costs #corroborates (0.95) — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2522
• Overlapping relationships in close communities generate both knowledge and incentives for trust. #expands (0.80) — Russell Hardin, Trust and Trustworthiness, 140
• Trust functions as social capital enabling collective purposes. #expands (0.75) — Russell Hardin, Trust and Trustworthiness, 399
• Trust is a costly risky investment expecting future cooperation #qualifies (0.70)