Morality, trust and trade

The Faith Instinct
Some points raised by chapter 8, “Morality, Trust and Trade”

Healthy economies are based on trust. The roots of our trading systems and economies are probably very ancient. In primitive societies, trust is based on observance of a common moral code, which is specified and enforced by the gods themselves. In modern states, secular institutions have taken over many of religion’s roles, but religion still seems to have an essential role in establishing the trust on which our economies depend.

A common belief system helps enforce compliance with a society’s codes of behavior. The social bonds created by worship have long made trade and commerce possible. Sacred narratives explain a people’s place in the world, give a framework for the moral code, and justify punishments for infractions. When common moral codes are followed, trust is high, social and economic transactions proceed easily and efficiently.

Do people obey moral rules because they are afraid of divine punishment? According to the enlightenment philosophers, people keep promises (and trust others to keep their promises) because they fear punishment. This view (that people obey rules out of fear) continues to be widely held, because religion still influences whether people observe moral codes.

Self-interest and trust: The basis of all transactions, social or commercial, is morality and trust. Most economists have assumed that the only human behavior relevant to their subject is self-interest; however, trust may be particularly important in large societies, where people must often deal with strangers. The political scientist Francis Fukuyama argues that economic life depends on a network of moral obligations (social capital) knitting society together. Fukuyama concludes that the role of religion in generating social capital has been undervalued, and finds some evidence that the level of social capital is decreasing in the U.S. Fukuyama also argues that the balance between individual and community interests has shifted dramatically in the U.S. in the last 50 years: “Communities of shared values, whose members are willing to subordinate their private interests for the sake of larger goals of the community as such, have become rarer…It is these moral communities alone that generate the kind of social trust that is critical to organizational efficiency.”

Creating a moral society: Wade asks if a society composed entirely of atheists could generate ties of morality and trust strong enough operate effectively. He argues that the issue is not whether atheists understand moral rights and wrongs, but whether or not they will act on this understanding if they have no fear of divine punishment. But what about affinity fraud? People have such a strong tendency to trust members of their own faith that sometimes rational calculations can be swept aside. The strength of religion-based trust is evident in affinity frauds, schemes that exploit the trust people feel for members of their own faith.

The economist Adam Smith described the marketplace as an invisible hand. This invisible hand leads everyone to follow their own self-interest, which also serves the common interest. But if efficient marketplaces can continue to operate only on the basis of trust, what happens when that trust erodes?

Wade reminds us that hands come in pairs, and the counterpart of the invisible hand following self-interest may be the other hand, which induces moral self-restraint. The basis of all transactions, social or commercial, remains that of morality and trust.