The Economic Effects of Declining Trust
Written by Henry Dampier Posted in Uncategorized
The noted security columnist Bruce Schneir recently wrote*:
In addition to turning the Internet into a worldwide surveillance platform, the NSA has surreptitiously weakened the products, protocols, and standards we all use to protect ourselves. By doing so, it has destroyed the trust that underlies the Internet.
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Trust is inherently social. It is personal, relative, situational, and fluid. It is not uniquely human, but it is the underpinning of everything we have accomplished as a species. We trust other people, but we also trust organizations and processes. The psychology is complex, but when we trust a technology, we basically believe that it will work as intended.
The problem of declining social glue extends past just a reduction in the trust that people have for technology companies due to the revelation of endemic wiretapping. When people stop trusting the statements of institutions, they become more expensive to persuade. They may become so expensive to persuade that it ceases to become possible to operate a large-scale economy in the same way as was possible before.
When people stop believing the news-writers and news-casters, they stop believing the advertisements that run alongside them also. They withdraw into their own social circles and begin shunning outsiders. Trade slows down as it becomes more expensive to convince people that the potential benefit of exchange with strangers outweighs the risk of exploitation.
This oughtn’t shock us. It’s become obvious over the decades that the Americans who trust what the official public institutions tell them tend to suffer. The people who take advantage of ‘0% APR financing’ on new cars on a paltry income wind up enslaved to their plastic vehicle. The people who indeed believe that “they deserve a break today” tend to wind up obese, with lesions appearing on their skin. The millenials who listened to their guidance counselors have become indebted, unemployed lawyers with albatross resumes and no meaningful skills.
As the betrayals mount, the people talk to one another about their suffering, and they become less willing to listen to the counsel of strangers. What is written becomes less believable unless it has been verified by someone with trusted wisdom.
High-trust cultures easily defeat low-trust cultures in any conflict. Nature itself rebels against the sort of culture that generates so much mistrust that privacy becomes forbidden both legally and as a matter of custom. If people are not trusted with the privilege of a private life, then they can hardly be said to be trusted at all.
Meanwhile, the proven liars need to spend more money on more beguiling stories to gain the same result. Over time, as the consequences for listening to those stories become more dire, it has a selection effect. The wise survive, and the credulous become crushed by their own inability to tell the difference between truth and falsehood.
Social trust renews itself in this way, in a new order. It’d be sensible to worry less about how to restore trust to the institutions that no longer deserve it and to be more concerned about building institutions that are worthy of trust — and protecting them from the same erosion that has deprived the youngest members of what remains of our society of the advantages that derive from a high-trust culture in which deals can be made with a firm handshake and eye contact.
High-trust cultures are more effective at achieving their ends than the alternative. More can be accomplished with fewer words and less paperwork. Michelangelo did not carve David upon the specifications of a committee.
* https://www.schneier.com/blog/archives/2014/05/internet_subver.html

This one raises interesting issues as to how much of a liabilty, especially long-term, the low trust societies are hindered with. When marketing becomes too slick or shrill, leaders of a certain type will guide their thedes away from that soul-sucking consumerism… They’ll encourage the up-and-comers to turn off the T.V. and to join a more fulfilling network.
J.P.O.