Trust

Share on FacebookShare on Google+Email this to someoneTweet about this on Twitter

Governments are large or small depending on the level of trust and civic attitudes people have for one another. These attitudes shape peoples’ taste for redistribution and public ownership, and also affect the quality of governance. This position has been advanced by a large literature; most recently in this interesting paper put out by IZA.

Here’s a graph which gets at the central idea:

One key advance in this paper is isolating the non-linear nature of this relationship. Broadly, there are three clusters of countries here — Scandinavian countries (lots of government, high-trust, high-quality); Continental European countries (lots of government, low-trust, low-quality); and Anglo-Saxon countries (low levels of government, medium-trust, medium-quality).

One explanation of this result (provided in the paper) is the following: high levels of government spending can be sustained under two social equilibria. In the low-trust world; you have a chronic levels of mistrust and civic mindedness. Nevertheless, the fact that uncivic minded people benefit from public services, but evade paying taxes, encourages more spending. High levels of corruption and low levels of public trust make the government work poorly. Yet individuals remain attached to the state, as in societies marked with a marked in-group bias it may remain a treasured source of largess and security. Where everyone cheats, as in Greece, it makes sense to demand more for yourself and leave the bill for someone else.

On the other hand, you can also sustain a large and efficient welfare state when everyone is civic minded and people typically do not shirk. High levels of trust allow individuals to coordinate the public provisioning of social insurance. Individuals are less likely to free-ride. I also wonder about thinking about this in light of Amar Bhide’s book, which argues against robotic finance in favor of a more discretionary, case-by-case Hayekian approach. Well, bureaucrats can be trusted with discretionary power in high-trust societies, while they either become corrupt in low-trust societies, or else you have to resort to dumb regulatory rules.

Many Anglo-Saxon countries (and Japan) appear in the middle. They are not so full of shirkers demanding large public provisions; nor are they so trusting that they sustain a Nordic utopia. In the absence of higher levels of trust or pro-social attitudes, it seems plausible that a larger government in these countries would come up somewhere between Sweden and Italy in effectiveness.

It’s also interesting to examine social trust in developing countries, as Ajay Shah and Vijay Kelkar do here:

China comes out as a very high-trust society. One wonders whether its governance successes, if any, ought to be credited to the citizenry of China rather than the wonders of Chinese central planning.

Other countries come out looking much worse — the rest of the “BRICs” for instance, plus Turkey and South Africa. As Arnold Kling and Nick Schulz point out, these countries have built governments much larger as a percentage of their economy than countries like Britain or America had at a comparable level of development. And as their levels of trust suggest, these governments are not particularly effective. Many social democrats expect these countries to build large welfare states as they grow richer, and it will be interesting to see how countries so large and distrusting will handle the challenge. Of course, there is substantial variation here, trust can change over time, the correlations are loose, etc. America for example has a small government even taking its trust into consideration.

So how do countries generate a more cooperative citizenry? One suggestion comes from Garret Jones, economist extraordinaire, who argues that the best way to drive cooperation is to induce patience and perceptivity, which are in turn driven by higher IQs. Jones in fact suggests that one of the ways in which IQ drives growth is through exactly one of the channels by which IQ generates a large “social multiplier.” This multiplier refers to the observation that a two standard deviation increase in IQ increases a person’s wage by 30%; but increases a nation’s wage by 700%.

23 Comments

  1. What is most striking about this graph is that trust is much more a matter of culture than it is of public expenditures. Note that all (as in all) of the high-trust countries are not merely Anglo-Saxon but Germanic plus Finland. I.e., northwest European or settled by northwest Europeans.

  2. Interesting are the outliers in the center, France at the top and U.S. at the bottom.

  3. Razib,

    A little off topic, but I thought I would post it anyways since this is discussed from time to time in this blog.

    http://pewforum.org/future-of-the-global-muslim-population-regional-europe.aspx

    A well-balanced look at the future of Islamic immigration and population in Europe from the Pew Forum. Essentially there is some cause for concern, but nothing like the catastrophic predictions made by Mark Steyn and the like.

    I think the real issue in 2030 will be Sub-Saharan African immigration worldwide, since this is the only major region of the world that still has a high birth rate (above 3.0 fertility rate).

  4. The relationship shown by the graph isn’t very convincing. The “outliers” are France, Germany, Italy, the United States, Mexico and South Korea. These are very high population countries compared to many of the points that are used to fit the curve. All have trust in a similar range and yet there is wide variation in GDP for social programs. On the whole, I think that the fair conclusion from the plot would be that trust of this kind is not an accurate predictor of GDP spending for social programs.

    Looking at the data points, my first intuition was that the percentage of people in labor unions is probably a better proxy for the result that is observed. It was a better match, but still not a really good fit: http://www.newunionism.net/library/member%20contributions/news/Unionism%20and%20Economic%20Performance.htm

    Straight out distance from equator is probably a better fit to the data than either trust or unionization rates. This sucks as a sensible cause and effect theory, but we don’t get to choose the facts.

  5. [...] Gene Expression » Trust. Categories: Uncategorized LikeBe the first to like this post. Comments (0) Trackbacks (0) [...]

  6. I’m too lazy to look up the exact study, but I would think it would be informative to view these results in the context of the relative racial heterogeneity of these various countries. As I remember, higher levels of government welfare programs generally correlated with great racial homogeneity.

  7. Totally unconvincing, indeed. Remove Turkey and you’d get a V-shape.

  8. [...] evidence to support my thesis that Chinese vs. Western thinking is a lot like weiqi vs. chess. A survey shows that Chinese are the most trusting people on earth. More than half of Chinese people believe that “most people can be trusted”. It’s [...]

  9. [...] This post was mentioned on Twitter by Adrian Monck, 小田切尚登. 小田切尚登 said: Table5によると、世界でダントツに人が信頼されているのが中国。次いでアメリカ、日本、ドイツの順。これをどう理解すればよいのでしょうね・・・。 http://www.gnxp.com/wp/2011/02/03/trust/ [...]

  10. I am a Norwegian, and when I have lived abroad, there is one pattern I have noticed that is relevant here.

    The locals trust me, far more than they trust each other. I have spoken with other Norwegians, who have the same experience.

    The origin for this might be cultural, and that the foreigners have learned that Scandinavians in general can be trusted, but it can also be that people notice behavior, and confer trust accordingly.

    It is for instance not hard to see that when people try to dominate you, that they are not really thinking about what is best for you, rather than what is best them.

  11. I wasn’t aware of this highly interesting study, so thank you for posting this. However, I’d like to point to my own (Christian Bjoernskov, Aarhus University in Denmark) study with Andreas Bergh (Lund University in Sweden) where we argue more or less the same as Algan, Cahuc and Sangnier. It’s out in the February number of Kyklos this year. We don’t look at the social expenditures that can be quite difficult to categorize – some direct expenditures take the form of transfers in other countries – but at total government size. It actually looks somewhat better than the above picture.

  12. Very provocative, and therefore valuable, but let me offer a few counterpoints from Francis Fukuyama and Eric Uslaner.

    Francis Fukuyama argues that France, for example, has high trust in government precisely because citizens have low trust in each other–the government is a ‘fair’ arbiter, and perceived as a meritocracy.

    China, by his view, is very high-trust within extended families, but very low-trust outside them. He suggests one of the biggest Chinese companies in the western world, Wang Laboratories, failed precisely because Dr. An Wang couldn’t escape the cultural imperative that he hand over the reins to his (unfortunately incompetent) son Fred.

    Uslaner is ‘the man’ in trust studies in my humble opinion. He notes that Scandinavia is an extremely homogeneous culture.

    He also suggests that high social trust is a function of optimism–if I believe that basically people behave decently and that I have control over my life, then I trust. If I believe people are out to get me and I don’t control my own destiny, then I don’t trust. Put that way it’s pretty clear where social trust is high in the world and where it isn’t, and correlations with GDP et al are less convincing.

    Uslaner’s logic somewhat parallels Garret Jones’ idea; I have no idea how you increase IQ, but Uslaner suggests education and reduction of great income disparities are good ways to increase trust.

  13. “Totally unconvincing, indeed. Remove Turkey and you’d get a V-shape.”

    Particularly notable because two of the biggest three outliers: Turkey and South Korea, are outside the Christian legacy (Turkey being 99% Muslim, give or take, and South Korea being about 50% non-Christian and predominantly non-Christian prior to about half a century ago). The third outlier, Mexico, is also notable in being the only other non-European country without a predominantly European descended population that has little local admixture. Cull those outliers and you have a Nordic high trust zone and not much of a pattern beyond that.

  14. Francis Fukuyama seem to be wrong about China, the study show that they got a higher trust level than US and Japan. It is more about culture than GDP. Another interesting result, it show that only India and Turkey Uni graduates have a lower trust level than overall average, they seem to be growing more distrustful during their college year.

  15. useless to the point of criminality. where to even start?

    how about low hanging fruit: does this chart mean (a) more trust creates more social spending, or (b) more social spending creates more trust.

    Or another low-hanging fruit which is picked up on by the hbd chick article linked above by another commentator: trust *grew* in germanic countries as immigration from turkey grew.

    ooh ooh, another correlation i can abuse just like this article: all that immigration out of turkey…must cause less trust.

    western biases loom so large and ugly its not even funny.

  16. I’d like to see a definition of public social spending. That seems ripe for political bias issues. (does adding charities ‘fix’ the outtliers, or cause more chaos? What about VA hospitals? I know the US has large state expenditures, were they counted?, etc)

  17. People who live in relatively rural areas tend to be more trusting than those who live in cities. (I have no cite for this). Perhaps the high trust nations have large populations of farmers, such as China, or relatively small or spread out populations for their land mass, such as Finland and Sweden.

  18. “People who live in relatively rural areas tend to be more trusting than those who live in cities.” How do you explain why India and Brazil have very high rural population, and very low trust level.

  19. “China comes out as a very high-trust society. One wonders whether its governance successes, if any, ought to be credited to the citizenry of China rather than the wonders of Chinese central planning.” The Chinese are strongly influenced by more than 2,300 years of Confucian philosophy, 60+ yrs of CCP rule regardless.
    Emotional intelligence and discipline are at the core of Confucian thinking. Do unto others what you want others to do unto you. With out a strong nation, one cannot have a happy stable family life. These principles are ingrained in Chinese children as soon as they are able to walk. Thus we saw the orderly behaviour of the survivors of the Wenchuan earthquake. According to a Western journalist at the epic center, not a single case of looting or breakdown of order. People stoically helped each other search for loved ones and shared whatever meager food available. They placed a lot of trust on the PLA that was there to assist/save them. So many people volunteered to help it was unbelievable, coming from as far away as Liaoning, bringing their own resources. As we saw,the whole nation collectively
    overcame this bitter episode with catholic trust for one another, with nationalism derived from deep rooted pride in the Chinese race and a 5000 year old civilization. To me, the 70% level of trust is not surprising. In their minds, they expect others to also show them the same kind of respect as they themselves show others. The Chinese are unique in their ability to make self sacrifice – for the next generation, for their country or group, for the future. How else does one explain the ‘miraculous rise’ of China in such a short time. Or the ability of overseas Chinese to overcome almost insurmountable challenges to dominate many economies in Asia.

  20. There is possible correlation between low-trust societies and political turmoils (revolution).

  21. [...] Thorfinn looks at the relation between government size and trust.  I think he’s overdrawing his conclusions, but the data is fascinating and maybe I’m wrong. [...]

  22. [...] Social trust and IQ. [...]

Leave a Reply

a