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Chapter 5 Institutions and Midlevel Explanations of Trust HENRY FARRELL T HE LAST FIFTEEN years have seen an explosion in research on trust, but there are still important gaps in our understanding of its sources and consequences.1 In particular, we know relatively little about the relationship between trust and the other sources of cooperation that social scientists have identified, most prominently institutions, the sets of rules that shape the behavior of communities of actors by providing individuals with information about the likely social consequences of their actions. How do we map out the relationship between midlevel phenomena , such as institutional rules, and micro-level expectations, such as those involved in trust? It is hard to answer these questions because debates about trust have emerged in partial isolation from broader social science debates about the respective roles of institutions (Knight 1998) and other midlevel social phenomena in supporting cooperation. The result is that even though scholars of trust are surely interested in the empirical question of how trust operates within environments shaped by institutions, they do not have the intellectual tools that would help them investigate this and related questions easily. On the one hand, it is surely appropriate to draw distinctions between trust-based cooperation and other forms of cooperation, where such distinctions are warranted. Scholars in the broad rational choice tradition have articulated a powerful critique of overly broad and simplistic accounts of trust found in, for example, the economics literature. Karen Cook, Russell Hardin, and Margaret Levi speak to the utility of distinguishing between trust and mere institution-induced cooperation (2005). 127 Many forms of cooperation in modern societies rest on institutions but do not involve trust. For some purposes, it may be useful to refer to the contractual relationship between a bank and a firm it lends to as involving trust, but there is a clear difference between the kinds of expectations that depend on contract and those that depend on personal relationships (see, for example, chapter 8, this volume). On the other hand, there is considerable murkiness and confusion about where institutions (and other structural forces) end and where trust begins. The encapsulated interest account, as currently formulated, says relatively little about how institutions might affect the more personal and intimate forms of trust it is most directly concerned with. Political culture theorists, for their part, acknowledge that institutions and the set of cultural values that includes trust shape each other. However, they remain quite vague about what this involves in practice, either stating that they co-constitute each other without seeking to disentangle the relationships further (Inglehart 1990) or lumping trust and institutions together under the generalized rubric of social capital (Putnam 1993). These and other confusions stem from gaps in our underlying theory. We do not have a properly developed theoretical account of how trust and institutions interact. Ideally, such an account would do at least three things. First, it would distinguish clearly between trust and institutions as sources of cooperation, disentangling their relative causal roles. Second, it would identify possible interaction effects between trust and institutions, identifying circumstances under which these effects are likely to support or to undermine trust. Finally, it would provide an explanation of those midrange forms of trust, which are poorly served in the current debate— forms of trust that are neither purely individual, nor at the highly abstract level of generality that, say, political culture accounts of diffuse interpersonal trust invoke. Midrange expectations of this kind play a key role in most complex societies, allowing actors from different social groups to navigate relations in contexts where broadly based impersonal institutions offer imperfect guidance as to what they should or should not do. Rational choice accounts of trust in particular would benefit from such an approach. Currently the most sophisticated rational choice accounts of trust are vulnerable to the critique that they neither encompass forms of trust beyond the purely personal nor explain how broad factors such as social and political inequality can affect trust (Uslaner 2004). Although there is no reason that rational choice is incapable of explaining such relationships , these critics rightly point to the need to develop an approach that can link aggregate social factors to trust and distrust between individuals. In this chapter, I map out the beginnings of a midrange rational choice approach that would allow us both to draw the necessary distinctions between trust and simple institution-induced expectations as sources of cooperation and to identify possible relationships between institutions...

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