Evolution of Trust in Economic Systems

When ET in the eponymous Spielberg movie follows a trail of Smarties to meet his new human friends, we find this entirely plausible — that a baby alien will quickly form a bond with human kids and for each to quickly learn to trust the other. This surely reflects the way trust is such a fundamental part of human nature that its absence would be more remarkable than its presence, even where one of the protagonists is a not overly attractive alien species! Another, less plausible, fictional character which has often been employed in economic settings is Homo Economicus. The character played by this economic actor is that of the perfectly informed, perfectly rational, self interested individual trying to maximise their personal utility. This view of the economic actor, particularly as it is used in decision theory, inspired Herbert Simon in his Nobel Prize award speech to criticise models of economic microphenomena [29]: “Thus economists who are zealous in insisting that economic actors maximize turn around and become satisficers when the evaluation of their own theories is concerned. They believe that businessmen maximize, but they know that economic theorists satisfice.” However, in the three decades since Simon’s speech there has been a large body of evidence accumulating which demonstrates the lack of universality of the assumptions of economic man [6] and has contributed to the advancement of more reasonable models, as described by Daniel Kahneman [14], another Nobel Laureate: “... proposed that an automatic affective valuation — the emotional core of an attitude — is the main determinant of many judgements and behaviours.”