Trust and the Law

Understanding the nature of trust has substantial implications for thinking about the economics of law. In this chapter the authors consider the interaction between laws and trust. They pursue this inquiry by looking at the growth of the behavioral economics and organizational economics literatures. After describing a model of trust, the authors review results on the relationship between trust and growth from the development and macroeconomics empirical literatures. The chapter then turns to evidence from experiments that shed light on mechanisms that may link trust and the law and help us understand why in some circumstances they may be complementary and in others substitutes. The authors draw some preliminary conclusions about the factors that might contribute to explaining complementarity of trust and the law at the macro level. The chapter ends with a discussion of some specific laws, and how these interact with trust.