An Economist Explains Why Trust Is Essential
Have economists neglected trust? The economy is fundamentally a network of relationships built on mutual expectations. Every time we interact with another person—to make a purchase, work on a project, or share a living space—we rely on trust. Institutions and relationships function because people place confidence in them. Retailers seek to become trusted brands; employers put their trust in their employees; and democracy works only when we trust our government.
In his new book, Why Trust Matters, Professor Benjamin Ho reveals the importance of trust to how we understand our day-to-day economic lives. Columbia News caught up with Ho recently to discuss the book, how he uses game theory and econometrics in his research, and why Bach would be the ideal dinner guest.
Q. How did you develop the idea for this book?
A. As a PhD student, I was faced with the terrifying task of coming up with an original research question. One that nobody had ever answered before. My solution was to try to tackle a question nobody had ever thought to ask. Inspired by a question from a roommate, I wondered, what can economics and game theory tell us about why people apologize? Apologies are designed to restore trust, and I was able to use game theory and experiments to better understand how words can repair a relationship.
I've been thinking about trust ever since. I've looked at the role of apologies in medical malpractice payments and chemical spills. I ran an experiment with Uber to look at how different kinds of apologies impact trust. Trust underlies every interaction in our daily lives, so there is plenty to study!
Q. Do you think the pandemic has further eroded people's trust in governments and economic institutions?
A. Yes and no. I ran an experiment with colleagues during the pandemic about the impact that fear of Covid-19 has on trust of outsiders (like foreign workers or refugees). To our surprise, we found that increases in fear of Covid-19 caused more trust of outsiders, not less.
More directly, a Gallup poll showed that trust in institutions (in particular, public schools and the medical system) went up sharply in 2020. External threats can still bring us together. However, the same Gallup poll in 2021 saw sharp declines of trust (back to 2019 levels) in those same institutions (schools and medicine as well). Trust receded as we became more assimilated to the threat of the pandemic, or because people with different priorities disliked how institutions like the Centers for Disease Control or school districts balanced those priorities during the pandemic.
Q. How do you apply game theory and experimental design to topics like trust, apology, identity, inequality, and climate change?
A. Math is just another language, and the mathematics of game theory is a way to precisely express concepts like trust. We could define trust using words—for example, trust is a belief about the reliability of another in performing a task that is conducive to cooperation. Or we could say the same thing using mathematical symbols and mathematical ideas like Bayes Rule and game trees.
While math doesn't allow us to capture the full richness of natural languages, it does allow us to be precise, and, furthermore, allows us to design precise experimental computer games where we can simulate real world trust situations in a lab. These experiments allow us to more accurately observe the trust behaviors of real people. We can do the same thing to study our attitudes about inequality, identity, and climate change.
Q. What are you teaching at Columbia this semester?
A. The class I've been teaching in Columbia’s economics department for the past couple of years is about the economics of trust. It's a senior level seminar, where I guide students through the design and implementation of their own research projects on a question about trust, using a combination of game theory, experiments, and econometrics. Some projects from last year investigated the relationship between trust and patience, the impact of trust on drug trials and the racial disparities of health outcomes, and the perceived trustworthiness of single versus married people.
Q. You're hosting a dinner party. Which three academics or scholars, dead or alive, would you invite and why?
A. Good question! Never thought about that before!
The first three names that come to mind are Kurt Godel, M. C. Escher, and J. S. Bach, based on one of my favorite books growing up: Godel, Escher, Bach won a Pulitzer Prize and was by the physicist Douglas Hofstadter (so maybe we should invite him as well.)
The book is about the interconnected ideas of a mathematician (Godel), an artist (Escher), and a composer (Bach), and it offers lessons about the nature of complexity. These lessons are especially important today because they are a good reminder that the world is more complex and interconnected than we think, and that the best, most creative ideas come when we draw from a diversity of sources.