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The Neglected Economics of Trust
Author(s) -
Perelman Michael
Publication year - 1998
Publication title -
american journal of economics and sociology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.199
H-Index - 38
eISSN - 1536-7150
pISSN - 0002-9246
DOI - 10.1111/j.1536-7150.1998.tb03371.x
Subject(s) - element (criminal law) , perspective (graphical) , economics , quality (philosophy) , sight , economy , market economy , business , political science , law , philosophy , physics , epistemology , astronomy , artificial intelligence , computer science
A bstract Economists have little understanding of trust. As economists, we are trained to think of the economy as an amalgam of individual agents, although the social element is an indispensable part of the economy. This perspective has caused us to lose sight of the role of trust. As a result, not only does the quality of life suffer, but the economy becomes less efficient. In this article, I want to call attention to the central importance of trust in a market economy. I will show that markets both require and destroy trust. As a result, measures that appear to promote the economy may actually threaten the long‐term health of the market by undermining trust.