- Cooperation Without Trust?
Cooperation Without Trust? is the capstone ninth volume in a Russell Sage series on trust. Ironically, had this been the first volume, it might have been the last, for this is a story not about too little trust, but about too much fuss. Contrary to "doomsayers who think that declining trust means declining social cooperativeness" (197), the authors argue that "trust is no longer the central pillar of social order" and "cannot carry the weight of making complex societies function productively or effectively."(1) Just as Ellickson argued that cooperation is possible without law (83), the authors show that cooperation also does not require trust. Increasingly, we must rely on people who are strangers to ourselves and our neighbors, due to high social mobility, the impracticality of self-reliance, and the opportunity costs of provincial horizons in an era of on-line commerce and global markets. Yet the potential gain from cooperation with a reliable partner is often much smaller than the potential loss from being suckered (80). How then is cooperation possible?
The standard top-down solution goes back to Hobbes. Cooperation depends on an effective legal system that enforces contracts and regulations. The bottom-up solution is mutual trust. In an engaging and non-technical discussion that is easily accessible to undergraduates, the authors question both these solutions. On the one hand, "law is too imprecise and too costly to cover the details of ordinary commercial agreements."(83) On the other, trust is "grounded in knowledge of the interests, the dispositional character, or the moral commitments of the trusted" (92), knowledge of which requires "ongoing relationships and close-knit networks" that "provide information about motivations and interests through intimate knowledge of the others in the network, and they also provide incentives for reliability."(185) This "relational trust" (or what Yamagishi calls "assurance") is based on "encapsulated interest" in maintaining profitable long term relationships and a reputation for competence and honesty in a close-knit group. The problem is that, "In the advanced industrial societies of today, we do not live enmeshed in such thick relationships." (196) Moreover, reliance on embedded relations can lead to distrust of outsiders and ethnic conflict (16), and relational trust is further compromised by power inequalities that may tempt the [End Page 851] less-dependent partner to take advantage (188). For all these reasons, "Societies are essentially evolving away from trust relationships toward externally regulated behavior" by "modern social institutions."(195-6) [all emphases are in the original]
The authors propose a third-party alternative that is more top down than mutual trust and more decentralized than a Leviathan – "informal social and organizational mechanisms," (16) including reputation systems (33), communal norms (91), honor codes (96), fictive kinship (98), institutional rules, and organizational controls that create incentives against opportunism, even in transactions with strangers. In a nutshell, cooperation is a rational strategy if I believe you have an interest in cooperation that encapsulates my own. "We usually rely on and cooperate with each other, not because we have come to trust each other, but because of the incentives in place that make cooperation safe and productive for us."(14) When the necessary incentives derive from a mutual interest in maintaining an ongoing cooperative relationship, we have cooperation with trust. When these incentives derive from impersonal institutional arrangements, we have cooperation without trust, secured by third-party sanctions – not just fines, but more importantly, loss of reputation, loss of certification or license to practice, or even banishment from the community.
The authors place special emphasis on the importance of institutional reputation systems in providing not only information about past behavior but also a powerful incentive for trustworthy behavior in the future (85). Examples include rotating credit groups (98), professional (110) and business associations, corporate monitoring (124), and academic institutions (114). Curiously missing (except for a footnote, 198) is any discussion of the increasing importance of on-line transactions between strangers, as on eBay, whose founder, Pierre Omidyar, quickly recognized that eBay could never police millions of on-line transactions...