What economists can learn from religion about trust

Trust is an essential component of a healthy society and a successful economic system. But how is it to be understood? Whereas economic literature tends to see trust as a rational calculation, Durham University’s Nicolas Baumgartner argues that the theology of the Early Church, which encouraged individuals to trust in God, also empowered those individuals to act for the greater good. This fuller notion of trust may assist today’s policymakers in fostering social cohesion.

It is difficult to imagine our liberal societies thriving on little or no trust: corporations, governments and monetary systems all require a minimum level of generalised trust to function. Trust, in short, is a social good necessary for liberal societies to flourish, and policy-makers would be well-advised to foster it.

But understanding how something as complex as trust works is a challenge. A particular branch of economics, experimental economics, has sought to bring light to the phenomenon over the past two decades. Yet, to this day, trust remains a puzzle for economists – but theology may well bring some useful insights. In particular, the Early Church, an unlikely source of inspiration for social scientists and policy-makers, may teach us something fundamental about the role of trust in society.

Trust is what enables us to be generous

St Luke describes the Early Church, the Community of Believers, which when translated literally means ‘those who trusted’, as having everything in common and that it ‘sold property and possessions to give to anyone who had need’. Interpretations have tended to present this idealised community as an inspiration for a fairer redistribution of resources, if not outright as the basis for a critique of capitalism and the unjust accumulation of wealth by the few. Whilst such a reading can be attractive to some, it misses a more radical message by the author of Luke-Acts: trust in God ought to be the defining factor in economic decision-making because it is what can enable individuals to act for the greater good.

A central theme recurring throughout Luke’s Gospel and the Acts of the Apostles is that those who trust in God and his providence are able to be generous: Zacchaeus and the poor widow are examples given by St Luke. That trust in God is so central to St Luke’s message that those who preferred to trust in their own investments rather than in God were chastised by the Early Church: Judas, who bought a field with the betrayal money, and Ananias and Sapphira, who kept part of the proceeds from the sale of their land. For St Luke, trust in God, or a lack thereof, is what informs economic decisions and makes them intrinsically moral acts.

From Homo Economicus to Imago Dei

Such an idealised portrayal of the Early Church should not be understood as an invitation to just trust anyone and give away money without further thought, on account God would provide a safety net no matter what. Rather, it is highlighting how a lack of trust in God can get in the way of our generosity, and through that, the enabling of greater social welfare. This is very different to the portrayal of trust in economic literature, where the decision to trust is the result of a rational calculation based on two main considerations: firstly, the perceived trustworthiness of the counterpart, and, secondly, whether the financial gain from trusting is worth the risk.

The default prediction of economists is that individuals will not trust others unless those have an incentive to be trustworthy. In other words, if they prove trustworthy, it is because they rationalise that being perceived as trustworthy will serve them better; trust is only rational if it can encapsulate the interest of the other. But economic and psychological experiments have shown this to not provide an accurate prediction: firstly, people tend to trust even when it is not fully rational, even if there is no existing relationship between individuals. Secondly, people expect to be trusted, and in cases in which they do not feel sufficiently trusted, they tend to retaliate by acting as if they were untrustworthy. Thirdly, people who are most prone to trusting are also found to show more unconditional kindness to others. Fourthly, people are more willing to take a risk by trusting a stranger than through a lottery, even if the odds of receiving any money back are the same. All these point to trust being perceived and enacted by people as a moral decision rather than a pure rational calculation.

Still, for the economist, the temptation is to portray such behaviour as utility maximisation again: the truster feels good about trusting and therefore acts on it, which, for the economist, is ultimately a selfish pursuit. But for the theologian, the act to trust is necessarily an ethical decision: if trust can lead to the common good, then it should be pursued. Trust becomes a habitual choice in the face of uncertainty rather than a pure calculation; an individual chooses to trust even it means taking some risk, and in that sense, is not rational in the way an economist would understand it.

The limits of economic analysis for policy-making

For the theologian, and based on several empirical studies, trust really ought to be understood much more as a virtue than a pure calculation. And understanding that trust is an ethical decision, freely choosing to do good, rather than a utility-maximising calculation, is crucial: how we model individual decision-making defines policy. If trust is to be fostered within society, economists and theologians will inevitably suggest different policies: the former would advise an incentive system or perhaps nudges to elicit higher trust levels, whilst the theologian is more likely to educate individuals as to why trust is a good and encourage them to act on it.

At the root of this difference is the modelling of decision-making: much of economic theory is deterministic because of the necessity to capture human behaviour through mathematical models, whereas the theologian is much more able to account for freedom of will. Reality, of course, is much more likely to be somewhere in the middle, not least because our decisions are contingent on learnt patterns. But policy-makers need to know the limits of the economic studies they use to make decisions, and trust is a prime example of that.

Thoughts for today’s policy-makers

Of course, not everyone believes in God, and more specifically, in a benevolent God. Still, the insights from St Luke’s portrayal of the Early Church remain valid: individuals will show themselves to be more generous if they can rely on a safety net, and this could be a solid state-sponsored welfare system. And as observed through empirical studies, individuals are more likely to be trustworthy if they are shown sufficient levels of trust. If we are to build a thriving liberal society, then, it may be necessary to drop the cynical belief core to economic theory that people inherently want to cheat the system and are only trustworthy when incentivised. Similarly, a forced redistribution of wealth to create a fairer society may not be necessary or even wise. Instead, our governments may be much better advised to elicit a fairer society by starting to show more trust in the people they serve.