Abstract
Trust is essential for the functioning of the social division of labour and the wealth creation processes that it embodies. Indeed, through the building of a role in the social division of labour one makes oneself completely dependent on other individuals to assume complementary roles. The analytical framework of a socio-economic space allows a complete analysis of this trusting behaviour. This chapter applies duality theory to identify five forms of trust and trustworthiness that underlie economic wealth generation processes in a social division of labour. This is accomplished through a reconstruction of embeddedness and role-building. This methodology also introduces a way of identifying what constitutes economic behaviour in comparison with other forms of social behaviour.
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Notes
- 1.
The most common framework in which trustworthiness has been investigated is the Prisoners’ Dilemma (PD) game. In the social sciences this is used as a benchmark to discuss cooperative behaviour among decision-makers. In the repeated PD the issue of cooperation versus non-cooperation comes most forcefully to view. For a review of trust issues in this context I refer to James (2002).
- 2.
This in turn implies that there is a perfectly methodological individualistic foundation to the emergence of a governance system. Namely, the various elements captured in the governance system simplify decision-making for the members of the prevailing socio-economic space. It allows these members to fully individualise their social interaction system through the adherence to certain behavioural norms and media, in particular. However, this brings up the issue of the trust we put in these institutional elements in the governance system. This is what I address in the next section.
- 3.
An example is paying by credit card, even though paying with cash is an option. The credit card incurs fees to the user, the consumer, as well as the recipient, the merchant. These costs are accepted by these parties to solidify their transaction through protections offered by the credit card system—Visa or MasterCard. Note that this refers to a rather institutional feature of the economy; trustworthiness emanates from a financial institution rather than from the reputation of the individual involved.
- 4.
Neuroeconomic experimentation consists of measuring brain activity while the human subjects are involved with economic interactions such as certain non-cooperative games.
- 5.
See also Onyeiwu and Jones (2003) for an earlier discussion of the same perspective.
- 6.
An updated version of this paper is available as Leijonhufvud (2007).
- 7.
In Bodo’s case these institutions refer to the whole make-up of the community in which Bodo lived; that is, the whole community enforces reciprocal behaviour and contributions to collective actions. In our contemporary global economy these institutions are the monetary system and the implementation of property rights in an individualistic philosophy of life—as described in the fictional cases of M. Baudot and M. Baudot Jr.
- 8.
We love to pretend that we are fully individualised persons in our contemporary neo-liberal society. We usually play up our so-called individuality, since in our neo-liberal economy that is fully expected; we are, of course, “free” individuals and allowed to fully individualise our personality. However, this is not really true, since true individualism would undermine the fundamental ability of others to trust us and, thus, the functioning of the very society we rely on.
- 9.
I refer here to this discussion of the Social Organisation of Production principle (Hypothesis 5) and the role of the Res Publica as the ancient source of our well-developed relationship with the governance structure in the economy. This includes the emergence of such institutional trust among the citizens of a society.
- 10.
This implies that I assume the socio-economic space to be rather advanced. If I assume a more primitive socio-economic space, say without a superstructure, the levels of extended trust are much lower. The sustained society is much less developed and the generated wealth is lower; we would probably then consider a Malthusian economy such as prevailing in preindustrial times.
- 11.
This also refers to the relationship between citizens and the res publica in ancient societies, where the res publica clearly extended the citizens’ brains to allow wealth creation.
- 12.
Duality theory is a fully developed part of algebra and can be represented formally through isomorphisms. This is explored more fully in the next sections of this chapter.
- 13.
In this regard, how we use elements from the governance system in our daily life is very Shackleian (Shackle 1972, 1979). Shackle builds a philosophical approach to economic behaviour around the fundamental idea that economic subjects construct mental images of future events to make decisions. Thus, I imagine that a green apple tastes in a certain way and subsequently decide to purchase a pound of green apples or not. This mental image is based on past experiences and transferred knowledge through education. This is closely related to the theory of case-based decision-making (Gilboa and Schmeidler 2001; Gilboa et al. 2002).
- 14.
This is the reason why thieves and terrorists usually obscure their socio-economic role in the economic interactions they pursue; a thief opening a checking account at a bank will certainly not list his job as such on the application form.
- 15.
As such, a brand name is a very recent invention, part of the rise of the consumption economy in the first half of the twentieth century. Brands and branding have completely subsumed personal or even professional categories of behaviour. In this regard, they supersede socio-economic roles to the level of the superstructure of the socio-economic space.
- 16.
The latter point also makes it clear why there might be confusion about interpersonal trust as a viable, functional form of trust. Many authors assume that interpersonal trust is the only true or viable form of trust, while in my approach this place is occupied by institutional trust; that is, the trust we put in the elements that make up our governance system.
- 17.
This refers to the fundamental, neo-classical definition of economics that emerged from a thorough debate in the first half of the twentieth century among neo-classical economists. The most pointed formulation of this economic principle was presented by Robbins (1932).
- 18.
It should be clear that the usage of elements from the governance system is costly and that, consequently, the mutual benefits from the relationship are lower than potentially available or realisable. Thus, the realised gains from an economic interaction are always lower than the potential benefits owing to the costly nature of the interaction. This mainly refers to social costs of the common trade infrastructure.
- 19.
It should be recognised that the differences between i and j might be fully a result of endogenous differentiation through the adoption of different socio-economic roles R i and R j by these two agents. This is the fundamental hypothesis of economic wealth creation through a social division of labour: the embeddedness itself generates the social wealth around which societies are built.
- 20.
However, in the capitalist economy that arose after the industrial revolution there emerged an entrepreneurial elite. This elite consists of a minority of population members, who have disproportional influence on the goings-on in the socio-economic space and have the qualities associated with entrepreneurship. These entrepreneurs have significant influence on the direction of the development of elements in the governance system G. In our contemporary global economy, there are three obvious entrepreneurial elites: the leaders in the financial sector of the global economy, in particular large, institutionalised bankers and institutional investors; the leading managers of the global energy industry; and the entrepreneurs in the information technology sector of the global economy, particularly the business leaders of Apple, Google, Facebook and Amazon.
- 21.
The most obvious and famous examples of such revolutions are the French and Russian revolutions of 1789 and 1917 (Schama 2004; Acton 1990). The collapse of the socialist states in 1989–1991 belongs to this class of revolutions, although many old elites transformed themselves during the latter period. But also less obvious examples such as the collapse of the Roman Republic in the period of 100–28 BCE (Schotter 2005) and the American revolution of 1776 can be explained as such (Bailyn 1992).
- 22.
The construction depicted in Fig. 4.5 represents the Fano plane. This is a well-known matroid as well as a symmetric graph from discrete mathematics. It is the unique minimal fully symmetric and non-trivial matroid, generated by three poles and their derived interactions. If the three poles are represented binary by {100, 010, 001}, then the four derived elements can be given by {101, 011, 110, 111}. These seven elements exactly form the Fano plane depicted in Fig. 4.5. I refer to Ruys (1974) for an elaborate discussion.
- 23.
This reasoning can be extended to the distance of I and G, which represents a similar measure of overall functionality of the socio-economic space, and its governance system G in particular. I refer to the discussion of Fig. 4.5 for an elaboration of this point.
- 24.
- 25.
In the reconstructive approach promoted here, this limited perspective on trusting behaviour is replaced by a more comprehensive view founded on the embeddedness of socio-economic interaction in a system of media, behavioural rules and socio-economic institutions. This includes these other forms of trusting behaviour as a natural consequence.
- 26.
Cities emerged in economic history as major governance structures that guide business to appropriate locations and at appropriate facilities. Thus, in a medieval European city retail business was placed in the city centre, close to the market square, while bulk trade was located at the harbour area where large merchants interacted to write large-scale trade contracts concerning bulk goods that were imported into the city. These locations were appropriately indicated with street names to guide potential customers (Pirenne 1952; Gies and Gies 1969).
- 27.
I emphasise here that the reconstructionist approach applied here opens up numerous interesting avenues and insights. First, we identify multiple forms of trusting behaviour as relevant for the understanding of economic interaction. Second, these innovative forms of trust exhibit surprising interpretations through their relationships with other trust categories and elements in the reconstruction of the economic interaction itself.
- 28.
This refers to the ability of online traders to individualise prices fully based on collected information about shopping behaviour. In advanced assessment methods a customer’s credit score, Facebook friendships and past shopping behaviour could inform Amazon to set a completely individualised posted price for the commodities considered by that customer.
- 29.
In a primitive economy, nearly all productive activities are conducted in the home and should be categorised as household production activities. Only after there emerges a primitive social division of labour within such an autarkic economy can the economic agents start to build trade networks, and consequently move away from household production as the main productive organisation mode.
- 30.
With reference to the previous footnote, it is clear that moving away from an autarkic economy is founded on the introduction of social production organisations. This implies that social production is a crucial element of the development of the subjective and objective spheres in the relational economy represented by a socio-economic space.
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Gilles, R.P. (2018). Economic Relationships and Trust. In: Economic Wealth Creation and the Social Division of Labour. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-76397-2_4
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