Regulation and Distrust–The Ominous Update

by on August 16, 2016 at 7:27 am in Data Source, Economics, Political Science | Permalink

Here’s a post I wrote in 2009 (no indent) that I will update today:

In an interesting paper, Aghion, Algan, Cahuc and Shleifer show that regulation is greater in societies where people do not trust one another.  The graph below, for example, shows that societies with a greater level of distrust have stronger minimum wage laws.  Note that the result is not that distrust in markets is associated with stronger minimum wages but that distrust in general is associated with greater regulation of all kinds.  Distrust in government, for example, is positively correlated with regulation of business.  Or to put it the other way, trust in government (as well as other institutions) is associated with less regulation.

minwagedistrustrespectdistrustAghion et al. argue that the causality flows both ways on the regulation-distrust nexus. Distrust makes people turn to government but in a society with a lot of distrust government is often corrupt and this makes people distrust even more.  Crucially, when people distrust others they invest not in the highest return projects but in human and physical capital that is complementary to distrust–for example, they invest in human capital that helps them bond with their group/tribe/family rather than in human capital that helps them to bond with “outsiders” and they invest in physical capital that is more difficult to expropriate rather than in easier to expropriate capital, even though in both cases the latter investments may be the all-else-equal higher return investments.  Such distrust traps are quite similar to Bryan Caplan’s idea traps.

Thus, societies with a lot of distrust generate regulation and corruption and citizens who don’t have the skills or preferences to break out of the distrust equilibrium.  Consider, for example, that in societies with a lot of distrust parents are less likely to consider it important to teach their children about tolerance and respect for others.

The update should be obvious. More and more this appears to be describing the United States. More distrust in government, more regulation, lower growth and more people who are so distrustful of one another that they can’t cooperate to break out of the bad equilibrium. Here drawn from Our World in Data is interpersonal trust in the United States.

DistrustoverTime

1 bjk August 16, 2016 at 7:33 am

100% guaranteed that this will not cause libertarians to rethink their support for more immigration. Immigration can never fail, we can only fail the immigrants.

2 TMC August 16, 2016 at 9:21 am

Less homogeneous society is less trustful, and according to this study, leads to more regulation. Not many libertarians actually support open immigration though (though it sure seems like it)

3 anon August 16, 2016 at 10:11 am

The US has always been incredibly diverse. Whatever we’ve had as a common thread to culture allowed very different Texas cattle barons and Chicago meat packers to sign contracts and make money. It certainly was not because El Paso and Chicago were the same, one culture.

4 Peter Schaeffer August 16, 2016 at 6:13 pm

anon,

“The US has always been incredibly diverse.”

No.

Early America was well-known around the world as a relatively homogeneous, fervently Protestant country. Foreigners tended to view Americans as relatively cohesive. Of course, American slavery was well known internationally. However, American culture was defined by the non-slave population.

For a decent sense of this, read “Democracy in America” by Alexis de Tocqueville. Although Alexis de Tocqueville was well aware of both slavery and the fate of native Americans, he viewed Americans as having a relatively unified national culture.

5 collin August 16, 2016 at 10:25 am

Then what happened from 1985 – 1994 in the big drop in trust? Immigration levels were not especially high and outside of the American Southwest (esp. California) the impact of immigration was not especially large.

6 Jeff R. August 16, 2016 at 10:59 am

Evidence-free hypothesis: the fall of the Soviet Union. Without a legitimately threatening external enemy, Americans lost their asabiyyah.

7 Anon39 August 16, 2016 at 11:19 am

Not a bad hypothesis but doesn’t neatly line up with the data. I would expect the answer lies in the idiotic scandals and trends of the time period: Iran contra, democrats turning against Reagan, S&L crisis, etc. which is not to say that the fall of the Soviet Union did not play a large role in removing social cohesion. Without an external enemy one looks next door to find their outrage de jour.

8 Nebfocus August 17, 2016 at 1:16 am

Can someone older than me explain if anti-patriotism was big in the 60/70’s? Since the 90’s it’s been pretty prominent.

9 Josh August 16, 2016 at 11:37 am

Lots and lots of violent crime?

10 Art Deco August 16, 2016 at 1:40 pm

Crime rates hit a plateau in 1980 and began a slide in 1990.

11 Cooper August 16, 2016 at 3:04 pm

It’s not just crime but the perception of crime.

Continued high levels of media focus on crime made people afraid. The failure of government to reduce crime levels quickly (and thus reduce the media focus on crime quickly) reduced faith in the ability of government to handle the issue.

http://content.gallup.com/origin/gallupinc/GallupSpaces/Production/Cms/POLL/cnc5wiuw0uac_vz2-pm78a.png

12 Peter Schaeffer August 16, 2016 at 6:16 pm

collin,

The Reagan Amnesty (the IRCA) is from 1986. The Reagan era saw a huge increase in inequality (gini index). Inequality is strongly associated with lower levels of trust. See http://voteview.com/Polarized_America.html for the data. Like it or not, immigration, inequality, polarization, etc. all move more or less in lockstep.

13 required August 16, 2016 at 10:28 am

Free Trade =
1. Movement of Goods and Services
2. Movement of Capital and Currency
3. Movement of Labor (Immigration)

Not supporting immigration = Not supporting free trade = Not Real Libertarian

14 Art Deco August 16, 2016 at 10:31 am

The US has always been incredibly diverse.

Nope. At the end of the colonial period, we had a dispersed aboriginal population living apart from the rest of the society, a negroid slave population (with a few free negroes) amounting to perhaps 20% of the total, and a settler population of which about 85% were from the British Isles with the other 15% a jumble of Germans (generally from the Germanophone periphery), Dutch, and French with none numerous enough to assert themselves outside of particular localities. Over 90% of the religious affiliates were protestant (Calvinist, Anglican, baptist, and anabaptist in that order). “Diversity” consisted of the slave population who were excluded from the polity, and the ‘diversity’ derived from that has been a never-ending social challenge.

15 anon August 16, 2016 at 10:41 am

What a myth-builder. “At the end of the colonial period” real (white) Americans were united? No strife by religion or national origin?

16 Art Deco August 16, 2016 at 10:48 am

Most of the state governments dismantled their religious establishments during the last quarter of the 18th century. There remained residual establishments for another 30 years in 3 states. The most intense example of religious strife concerned the legal disabilities laid on the Catholic population in Maryland, which were removed ca. 1830. They will, of course, be re-instituted in the next several decades.

17 anon August 16, 2016 at 11:00 am

Anyway, more connected to trust and regulation, a Texan’s distrust of New Yorkers was probably about the same for the last 150 years. The institutional trust that allowed them to work together was based on law, lawyers, and an adversarial system when cooperation did fail.

It is more myth-making that Americans were just “homogeneous” and so had no disagreement or conflict.

18 derek August 16, 2016 at 11:13 am

It is no problem if the differing parties have nothing to do with each other. Or very limited.

When Texas starts imposing something on the Northeast, then there is a problem. And visa versa.

19 Peter Schaeffer August 16, 2016 at 6:10 pm

anon,

Early America was well-known around the world as a relatively homogeneous, fervently Protestant country. Foreigners tended to view Americans as relatively cohesive. Of course, American slavery was well known internationally. However, American culture was defined by the non-slave population.

For a decent sense of this, read “Democracy in America” by Alexis de Tocqueville. Although Alexis de Tocqueville was well aware of both slavery and the fate of native Americans, he viewed Americans as having a relatively unified national culture.

20 Moo cow August 16, 2016 at 10:46 am

Negroes? Negroid? Really? How old are you? 90?

21 Art Deco August 16, 2016 at 10:52 am

I’m old, and you’re puerile.

There is not any ethnic descriptor that would have been appropriate for the slave population and referring to them as ‘black American’ would be anachronistic since most of them were fairly recent arrivals (about half of all slaves imported during the colonial and antebellum eras arrived prior to 1780 and half after).

22 Tom T. August 16, 2016 at 11:41 am

It actually kind of lends a science-fictiony aspect — like they live on planetoids.

23 Cooper August 16, 2016 at 3:56 pm

From the prospective of modern Americans, Calvinists and Anglicans look like the same religion.

From the prospective of 18th Century Americans, they were radically different faith.

24 Troll me August 16, 2016 at 12:26 pm

Either that or racists don’t trust immigrants and this tilts the data. The effect has gotta be more than zero.

For me, I think this is not about homogeneity, but about knowing that someone is from a culture where the idea of, say, stealing a wallet from a new acquaintance wouldn’t even cross the minds of 99% of people. Surely, 200 years ago the situation would have been rather different.

25 Peter Schaeffer August 16, 2016 at 5:54 pm

TMC,

Libertarians do in fact support Open Borders. Occasionally the pretend otherwise. However, the truth is otherwise. Here is a quote from “Why open borders won’t work” by TC.

“Land use restrictions are often a more important “”immigration policy” than border control per se. It is not just how many people get in at what cost, but who can afford to live here. This includes zoning laws, restrictions on the number of people allowed to live in an apartment, policies toward “squatters,” and rules for the homesteading of public property. So by “open borders” I mean also liberal land use policies; nominally open borders would matter far less if unskilled laborers couldn’t also afford to live in the U.S. (Note to anti-immigration types: you are focusing too much on the ease of crossing the border and not enough on the costs of living here. How much the best immigration restrictions involve land use policy or border policy is a curiously underexplored question.)”

“That is why I do not favor unlimited immigration. To the extent that nominally “open borders” would be tolerable, it is because we already impose implicit immigration restrictions through land use policies.”

If you think “we are underinvesting in shantytowns” and believe that (unenforced) zoning laws constitute a sufficient restriction on immigration, then you favor Open Borders. There is little point in pretending otherwise.

26 Thin-Skinned Masta-Beta August 16, 2016 at 6:38 pm

Looking at the chart, both Portugal and Czechia show high distrust / low trust. What explain could this? I don’t imagine that these small countries are have the same kinds of challenges of large diverse societies. These are certainly less trustful, but less homogeneous?

27 Peter Schaeffer August 17, 2016 at 1:48 pm

TSMB,

For better or worse, Europe has a rather pronounced North-South schism (and East-West as well). The nations of Scandanavia have been high-trust societies for a long, long time. Trust declines (roughly) as a function of distance from Sweden. Why isn’t clear. However, the data is pretty clear on this point. Portugal is a long way from Sweden…

Of course, diversity reduces trust in any society. Trust will no doubt decline in Sweden over time unless Sweden ends mass immigration.

28 Mark Caplan August 22, 2016 at 6:06 pm

The Libertarian Party platform as adopted in May, 2016, states: “Economic freedom demands the unrestricted movement of human as well as financial capital across national borders.”

29 celestus August 16, 2016 at 7:52 am

Huh, of all the time series that you wouldn’t expect to show a positive association with crime rates…

30 Florian v Schack August 16, 2016 at 8:31 am

Crime rates have plummetted since 2000.

31 celestus August 16, 2016 at 8:34 am

Since 1980, no? Which makes it a positive association.

32 samsondale August 16, 2016 at 9:12 am

Perhaps it is police reporting of crimes that has changed and not crime rates?

33 Andrew M August 16, 2016 at 9:17 am

Perhaps crime has fallen *because* people are less trusting. If I don’t trust people, I’ll lock my car and my home; ergo I won’t become a victim of crime.

34 derek August 16, 2016 at 9:43 am

No, the other way around. If you can’t leave your home unlocked you will support a vigorous and capable police state. Police states work. It is possible with enough resources to control a restive population through effective policing. The problem is that it has the secondary effects that Alex describes, where investment is not in growth but in tribe. Eventually the expensive and intrusive police state can’t be afforded by the economy. The natural progression of police forces into foreign invaders with no connection to the community becomes more and more expensive to be effective all the while the community has less resources to pay for it all.

35 Art Deco August 16, 2016 at 10:41 am

No. The fall in crime is manifest in survey research as well as police reports and has been most intense with regard to homicide, which does not suffer reporting problems.

36 collin August 16, 2016 at 10:11 am

The big fall in crime happened after 1990 and really nobody has defined why it happened. (Living in SoCal nobody predicted we would see it ever.)

I believe the percentage of crime per person did decrease after 1981 but the crime totals were still increasing (due to population increases) during the 1980s.

37 Art Deco August 16, 2016 at 10:43 am

The fall in index crime was about 30%, not chump change, but not as large as people make out. The fall in homicide was about 50%. Might just have something to do with the sextupling of the prison census and innovations in police procedure (in New York and other loci like East Orange, NJ. In New York, the homicide rate declined by 82% during a run of years when it increased in Baltimore).

38 j michka August 16, 2016 at 8:42 pm

Well, then how is it, according to the Orange Il Duce, “America is a bright, shining crime scene on the hill”, and the scared Trumpets Believe him?

39 daguix August 16, 2016 at 8:10 am

So does it mean European Union integration process is a good way for countries to escape Bryan Caplan’s ideas trap by giving them a roadmap to follow?

40 JH August 16, 2016 at 8:24 am

Is there good evidence that immigration is driving down rates of trust? I would be surprised if most of the decline was explained by immigration–the decline seems too big for that. And people have studied whether immigration negatively affects institutions (although maybe the effects on trust per se are different:

http://link.springer.com/article/10.1007/s11127-015-0254-y?sa_campaign=email/event/articleAuthor/onlineFirst

41 Tascher August 16, 2016 at 10:01 am

No. And the abstract concept of “Trust” can not be measured nor compared in populations.

The whole premise here is social-science-fiction.

42 Art Deco August 16, 2016 at 10:33 am

It can be measured as well as any abstract characteristic with a psychological component.

43 msgkings August 16, 2016 at 12:37 pm

So, not at all well

44 Art Deco August 16, 2016 at 10:33 am

Is there good evidence that immigration is driving down rates of trust?

Some of Robert Putnam’s work, published only reluctantly.

45 Garett Jones August 16, 2016 at 3:42 pm

My Economics Detective podcast covers the experimental, management, and cross-country evidence on ethnic diversity. William Easterly’s work, as well as Robert Putnam’s (noted elsewhere here) provide evidence that in the normal range of variation, rising ethnic diversity (not the same as immigration to be sure) tends to weaken institutions and productivity in a variety of settings.

http://economicsdetective.com/2016/07/costs-ethnic-diversity-garett-jones/

46 The Original D August 16, 2016 at 5:46 pm

I think the more obvious explanation is that the Internet allows an order of magnitude more scams. Phishing, identity theft, bogus snake oil products and conspiracy sites. People are more likely to either have been scammed or know someone who has.

47 Troll me August 17, 2016 at 9:36 am

So, you meet a random person, you can develop trust as easily as before, but report lower trust as a result to exposures online? Sounds … pretty plausible.

I guess you could just straight up ask, after the first question about trust, “does this general rating represent more online or offline, so-called “real world” interactions and relationships? If there is a difference, please report the numbers seperately.” Followed by something to rate the level of trust in their community.

48 Peter Schaeffer August 16, 2016 at 6:19 pm

JH,

“Is there good evidence that immigration is driving down rates of trust?”

Yes.

See http://voteview.com/Polarized_America.html for the data. Like it or not, immigration, inequality, polarization, etc. all move more or less in lockstep. Of course, the Polarized America data shows correlation, not causation.

For better or worse, Putnam provides causation.

49 HL August 16, 2016 at 8:24 am

“In recent years, Putnam has been engaged in a comprehensive study of the relationship between trust within communities and their ethnic diversity. His conclusion based on over 40 cases and 30,000 people within the United States is that, other things being equal, more diversity in a community is associated with less trust both between and within ethnic groups. “

50 Troll me August 17, 2016 at 9:40 am

Takes time to get to know people too.

Maybe you’d get the same result if just looking at culturally similar people who simply didn’t know each other? I doubt it’ll be that relevant among those same people, say, a couple generations down the road, unless something in particular contributes to it becoming that way.

51 Edgar August 16, 2016 at 8:34 am

More evidence of a failed quasi-democracy. The US is in a civil war by other means. Time to follow the USSR’s lead, pull the plug, and start over as independent, sovereign states.

52 Art Deco August 16, 2016 at 10:36 am

Huh? The main sources of challenging diversity would be the black and hispanic populations, who are just about everywhere in considerable numbers (bar in states which have only 3d tier and 4th tier cities and are the least suitable for a sovereign existence). Decentralization’s a good thing, but it does not get around this problem.

53 JH August 16, 2016 at 8:34 am

Yep, there is evidence that ethnic diversity reduces trust, although that’s not universal–some studies find that diversity and immigration have no net effects on trust in certain countries (I think Canada is an example). But Putnam doesn’t tell us whether immigration is a major part of the explanation about why trust is declining the US.

54 derek August 16, 2016 at 9:48 am

Don’t think Canada is an example. All the dysfunction that the US demonstrates is evident within this country. Our restive underclass is small enough to be ignored most of the time. It is also a defacto crime to write about immigrant populations in a negative way.

55 Cooper August 16, 2016 at 3:59 pm

Canada doesn’t have a history of slavery and it doesn’t have a porous border with a third world country.

The typical Mexican in Canada is very different from the typical Mexican in California.

Similarly, the Africans who voluntarily moved to Canada are nothing at all like the Africans who were moved to the United States in chains.

56 Troll me August 16, 2016 at 6:24 pm

“The typical Mexican in Canada is very different from the typical Mexican in California. ”

I agree with you all around, but I think it’s worth pointing out that Canada offers enough legal positions to meet most employer demand, and the ease of coming and going legally has the effect that they don’t actually stick around. The point seems to be eternally lost of most Americans, but admittedly it is not a sure thing that non-overstaying with such a temporary visa situation would work out the same in the USA.

57 j michka August 16, 2016 at 8:38 pm

Don’t forget how Canadians dismiss and look down on First Nations. “Canadians are soooo much more tolerant, unless you’re tribal, and then you don’t exist.”

58 Troll me August 17, 2016 at 10:14 am

And then there are the ones who want to lynch anyone who doesn’t treat First Nations with baby gloves. They got pretty screwed so, how can we help them help themselves? Their cultural extermination is no longer the plan. Public resources are dedicated to the preservation and re-introduction of what is known of native languages within the education system.

The main question with First Nations right now relates to whether the federal government should impose financial transparency on local leadership or leave it for the local level to demand that transparency.

The previous governing party decided that the federal government had the right to impose fairly detailed accounting requirements for public dissemination (the previous governing party also passed a law requiring this of unions, but nothing equivalent for corporations, in one of their trademark “transparency for you, not for me” routines). Both of these laws were tossed very quickly when the new government came in, and not the political hot potato revolves around trying to make the present government look bad for it instead of actually trying to promote that local demand for transparency from those governments.

The right out nanny states the left, yet again. But only against the left. And seems to promote centralization due to addiction to cheap political points, rather than their traditional agendas (to my knowledge never actually followed through on when in power) of decentralized accountability and decision making wherever practical.

59 Troll me August 17, 2016 at 10:02 am

You live in Alberta (right?). This is one of the main characteristics in which Albertans are stereotypically, and typically, much “more American” than elsewhere. I don’t think you’re aware of the extent to which you speak for yourself or the extent to which specific surrounding may condition/influence such perspectives.

However, with a Muslim mayor in Calgary and a female premier taking the helm during the storm, perhaps these stereotypes are overplayed somewhat? Or maybe women and the type of Muslim you find in Alberta are just that cool?

Worth mentioning, I’d bet that outside of some handful of neighbourhoods in Calgary or Edmonton, probably the “lost wallet return rate” in Alberta is among the highest in the world. And it’s not at all rare for an Albertan to make a first good move, say, buy a beer, offer to share some food/drink sort of think.

But if you fall into the categories “from Ottawa” (baaaad), “from Toronto” (damn snobbish elites, I hate you already, unless you have the snobbish elites too), “from Ontario” (finally you recovered from your mental illness and left?), “native” (we don’t need no drunks around here), “Muslim” (you’re not planning to blow anything up are you?), “environmentalist” (I hope you get mauled by a bear, tree hugger), etc.

So if I meet people from Alberta, I just play up the fact that I have family in the prairies going back generations, and if discussing other locations lived, try to steer away from discussion of “Toronto”, “Ontario”, especially “Ottawa”. Basically, it is expected to proclaim these places to be horrible horrible places to live and full of stupid, ignorant people, or otherwise it will be difficult to have the respect of people in Alberta.

(As opposed to BC, where they’re just like “WHAAAT!??? You just figured out that BC is ten times better than Ontario!!??? Hey, let me tell you about some really cool stuff to do around here … “)

60 j Michka August 19, 2016 at 4:00 pm

I don’t know if Troll was talking to me, but no, I’M not in Alberta, I’M South of you in WA state. BC is pretty cool. Van is very cool! But there seems to be some problem below a First Nation deck, Troll.

61 Left Outside August 16, 2016 at 8:35 am

How much of this is the result of changing demographics? Is this a generalised decline or are less trusting demographics growing?

62 The Engineer August 16, 2016 at 8:40 am

Jeez, how has no one said this yet?

Vote Trump, make America great again!

63 Yancey Ward August 16, 2016 at 10:56 am

They probably have, and been deleted. It seems one has found the line that can’t be crossed in the comments here. Odd, isn’t it?

64 j michka August 16, 2016 at 8:35 pm

Yeah, right… Make America GRATE again.

65 TuringTest August 16, 2016 at 8:46 am

Isn’t lack of trust an argument in favor of less immigration and strict border controls (i.e. Doesn’t trust require a high level of homogeneity)?

66 bellisaurius August 16, 2016 at 8:59 am

There wasn’t a trust bump after 9/11 or desert storm? That feels off.

67 collin August 16, 2016 at 10:06 am

If I had to guess that both desert storm and 9/11 occurred during jobless recessions and that dominated people trust factor. It has to be remembered that Bush Sr. in 1991 was the conquering hero and lost the reelection campaign the very next year so Americans did not feel the buzz of the victory.

68 Floccina August 16, 2016 at 9:07 am

I hope some technological change makes trust less nessesary. I think, for example, uber allowing customers and drivers to rate each other reduced the need for trust.

69 derek August 16, 2016 at 10:01 am

I would suggest it is the other way around. Uber builds trust by word of mouth and excommunication. Just as you would ask someone in your family or close community how it is to deal with someone, the rating scheme gives you feedback from your community of uber user or drivers about someone. You earn trust by meeting the expectations of the group, and become part of the group.

Lets do a thought experiment. Imagine if Uber set up a rating scheme that adjusted based on the race or ethnicity of the person. How long would the rating system trust last?

70 MikeDC August 16, 2016 at 11:34 am

It’s not that technological change makes trust more or less necessary, it provides alternate means of creating and destroying it.

Further, competition between agencies seeking to “establish trust” is likely to be very destructive. IE, regulators who ostensibly serve to establish “trust” in traditional taxi services seek to undermine Uber and its high-tech ratings. And these, of course, undermine traditional regulators and make them look like nothing more than tools of self-interested taxi drivers.

In such situations where trust systems compete, overall trust would obviously fall.

71 rayward August 16, 2016 at 9:11 am

I suppose it’s only a coincidence that (long term) trust was falling as inequality was rising. Trust also coincides with prosperity, with short-term ups and downs, but with the trend downward as shared prosperity declined and inequality rose to historic levels. Likewise, the trend is for more regulation as inequality has risen, not surprising since anti-social behavior (by those at the top as well as those at the bottom) has increased along with inequality.

72 Peter Schaeffer August 16, 2016 at 6:01 pm

rayward,

Mass immigration strongly correlates with both lower trust and greater inequality. See http://voteview.com/Polarized_America.html for the data. The correlations between immigration, polarization, and inequality are amazingly high.

73 chuck martel August 16, 2016 at 9:15 am

Let’s see, what kind of immigration controversy occurred in 1972? Oh, there really wasn’t one, but there was a break-in at the Watergate complex in DC. US troops left Viet Nam. The US had abandoned the gold standard in August of the previous year. Gasoline had reached the preposterous cost of .55/gallon. No reasons for distrust.

74 Art Deco August 16, 2016 at 10:38 am

The U.S. abandoned the gold standard in 1933. What was abandoned in 1971-73 was the Bretton Woods system, which incorporated a currency peg but no trade in gold bar among central banks. The peg was what Sir Alan Walters called “Irish fixed rates” (“They’re fixed. Until they change.”).

75 byomtov August 16, 2016 at 4:56 pm

Before 1971 foreign governments could convert their dollar holdings into gold at the fixed rate of $35/oz. Well, sort of, since there actually wasn’t nearly enough gold to cover a run.

Nixon cancelled this. It was not really a gold standard because private holders of dollars, including US citizens, were barred from exchanging dollars for gold.

76 asdf August 16, 2016 at 9:17 am

Maybe your libertarian vision of a world of autonomous individuals that view all other people as an exploitable means to an end has had an effect on trust.

77 Slocum August 16, 2016 at 9:57 am

Uh — what? The libertarian vision is of viewing other people as potential partners in mutually beneficial exchanges. And, sure enough, there’s evidence that participating in markets improves trust, for example:

http://journals.plos.org/plosone/article?id=10.1371%2Fjournal.pone.0055968

And:

As it turns out, empirically, the strongest cultural predictor that participants will
play fairly with strangers is how market-oriented their society is.
Note that this is not just the result of one set of studies. Either studies produce
similar results. Zak and Stephen Knack have shown that market societies also tend to
be high-trust societies, while non-market societies tend to be low-trust societies.
Omar Al-Ubayli, Daniel Houser, and colleagues have shown that “priming” people
with words related to markets and trade makes them more (not less!) trusting,
trustworthy, and fair in experiments. That is, when we get people into the
market mindset, they become nicer.

https://goo.gl/j6u0Az

78 derek August 16, 2016 at 10:06 am

So you are telling all of us not to trust a libertarian because they are evil, nefarious and untrustworthy and that they will probably eat your puppy.

I think you have come across the solution. Remarkable and enlightened. All we need is to paint anyone in the out group, defined by not agreeing with us, as nasty and bad, stop having dealings with them, stop any communication, and tell anyone who will listen that they are evil.

The end result will be deep trust among all of us, except those on the outside.

79 Art Deco August 16, 2016 at 10:58 am

There aren’t many actual libertarians. You have a scatter of objectivists pondering Aristotle and Ayn Rand’s fiction (though Ayn Rand eschewed the Libertarian Party and Society for Individual Liberty and favored a drably practical sort of politics when she gave any thought to it). neo-Confederates, goldbuggers, arrested development cases with their knickers in a twist about the drug laws, and posing academics pushing open borders. Friedrich Hayek is dead, Milton Friedman is dead, Alan Greenspan and Thomas Sowell and Richard Epstein are quite elderly. Oh, there’s Megan McArdle.

80 Mark August 16, 2016 at 9:18 am

Rather than immigration, which I would think would have different effects on trust in border vs nonborder states, wouldn’t the more likely culprit be media? SJW/PC on the left, FoxNews/radio on the right? They might use immigration as an issue but not exclusively.

81 derek August 16, 2016 at 10:08 am

The media in some places in Canada won’t describe the ethnicity of criminals, even sometimes not naming them if it is obvious in an attempt to build trust.

82 Li Zhi August 16, 2016 at 9:23 am

Another facet of human behavior reduced (unambiguously, of course) to a single parameter. What’s next? Love, hate, fear, intent, …? Wow. I can’t tell you how much I trust this kind of analysis. The really cool thing is that if I use question set A in context/language 1, then there exists an exactly (or nearly) equivalent set of questions A’ which can be used half way around the world, in a culture and with a language completely different than the context of question set A.

83 Tacitus August 16, 2016 at 9:26 am

Corruptissima re publica plurimae leges.

84 Yancey Ward August 16, 2016 at 11:00 am

Indeed. We needed a study to rediscover this.

85 collin August 16, 2016 at 10:02 am

Big why did trust levels drop so much from 1985 – 1994 in which it never really recovered? I know Iran-Contra might have impacted 1986 – 1987 numbers and I do know that was the jobless recovery recession with significant falling real wages. (There might be an increase in alternative media here as well as Rush Limbaugh popularity really grew.) The fall of Soviets happened during this period but the fall starts before 1990.

In reality, the government, especially local, today in terms of corruption is a lot more clean than 1970s or even before.

86 Art Deco August 16, 2016 at 1:37 pm

1. Perhaps cohort effects. A mass of people from the Greatest Generation born during the years running from 1910 to 1920 die off and are replaced with Gen X cohorts born from 1966 to 1976.

2. Mr. Reagan’s retirement; the advent of the Clinton crime family.

3. Occult factors also manifest also in George Bush the Elder’s defeat. The 1992 election was quite odd. A satisfactory President (and combat veteran) is rejected in favor of an oleaginous draft-dodger. Mr. Carter was voted out of office. The man had made a number of irritating policy errors and in general conducted himself in such a way that public morale was in the toilet. Mr. Hoover was voted out of office. You preside over an economic catastrophe and that’s what happens. Mr. Taft was voted out of office, a consequence of intense policy disputes within the Republican Party. Messrs. Harrison and Cleveland were voted out of office once each (a consequence of minor shifts in preference in and amongst an evenly divided electorate or a consequence of minor shifts in comparative talents at the art of electoral fraud given an evenly divided electorate). Mr. Pierce was rejected by his political party (see bleeding Kansas) and compelled to leave office. Mr. Van Buren was voted out of office (economic catastrophe on his watch). Mr. JQ Adams was voted out of office (he hadn’t won a plurality to begin with).

87 collin August 16, 2016 at 3:32 pm

1. Perhaps cohort effects. A mass of people from the Greatest Generation born during the years running from 1910 to 1920 die off and are replaced with Gen X cohorts born from 1966 to 1976.

Thanx!!! I graduated college in 1992 and I remember the S&L recession well as the job market crashed in 1991 and 1992. (And I lived in Socal so Rodney King riots were huge as well.) Otherwise, the 1992 election was weirdest in my lifetime before Trump came along and just felt like the nation needed to move on from The Greatest Generation politics at the time. (And after witnessing the Iran Contra affair, I learned an effective President may bend the rules.)

88 Ivy August 16, 2016 at 10:13 am

Trust in the media has declined precipitously in recent years, as evidenced for example by the pushback on the errors of omission and commission that appear routinely. The reduction in objectivity, however that might be measured, is a sign of a type of distrust. As the citizens of the old USSR said, there is no News (Izvestia) in the Truth (Pravda) and no Truth in the News.

89 jeff Michka August 16, 2016 at 7:04 pm

ALso you left out “What is a copy of Pravda good for? Ans: Nothing. you can’t even wrap fish in it.

90 GoneWithTheWind August 16, 2016 at 10:33 am

It is possible to create a chart with any two factors. You could have charted the correlation between more regulation and hot chocolate use for example. Or dress length and distracted driving. Or alcohol consumption and reading Shakespeare. I am sure some of them would show strong correlations but still be meaningless.

91 Mark Bahner August 16, 2016 at 12:23 pm

“It is possible to create a chart with any two factors. You could have charted the correlation between more regulation and hot chocolate use for example. Or dress length and distracted driving. Or alcohol consumption and reading Shakespeare. I am sure some of them would show strong correlations but still be meaningless.”

But some of them would be meaningful, like the correlation between the number of U.S. patents issued and global weather-related losses:

http://markbahner.typepad.com/random_thoughts/2007/04/us_patents_caus.html
http://markbahner.typepad.com/.shared/image.html?/photos/uncategorized/2007/04/11/ipcc_figure_sm_xxx_3.jpg

92 Art Deco August 16, 2016 at 10:39 am

News flash. Diversity is not our strength.

93 Pete Dushenski August 16, 2016 at 11:15 pm

Good God get this man a blog!

Art, it takes a special breed to make me google “site:marginalrevolution.com art deco” just to read some rando’s comments from however many months ago. Seriously, I suspect your long-form would be in the top-10 worthwhile reads on this whole wasteland of an Internet.

94 freethinker August 16, 2016 at 11:14 am

Confusing correlation and causation?

95 Erik Williams August 16, 2016 at 1:00 pm

Immigration and diversity breed distrust.

Hence the support for Trump. Americans want to stop the trend

96 Adam August 16, 2016 at 1:04 pm

What’s the basis for the “more regulation” in the update?

97 Ray Lopez August 16, 2016 at 2:06 pm

Blame “Generation X”, notice distrust started around 1990, with the Grunge crowd. You can’t blame Boomers for this one!

98 mulp August 16, 2016 at 2:12 pm

Ok, so trust in government was highest in the 70s and before because of less regulation.

OK, so let’s roll back the regulations of the past 35 years to the 60s:

Prohibit withdrawals from money market funds more than once a month and require 5 business day notice

Cap loan interest rates to limits based on type of loan with the maximum rate set at 12%

Cap interest on savings to 5% and no interest allowed on checking

Require substantial assets to open a broker account to buy and sell stocks and bonds

Require employers to recognize unions

Require employers to protect worker safety

Require businesses to be honest and not commit fraud and use deceptive sales tactics

Heavily fund university, college, and trade schools with State and local taxes so tuition is easily afforded on minimum wage work

Set minimum wages high enough for an individual to live on without welfare

Allow voting by telling election officials who you are and that you are qualified and they trust you

Just for a start on deregulating by taking America back to the government of the 60s when government could be trusted.

99 jeff Michka August 16, 2016 at 7:12 pm

You forget, the seminal political event in the US during 70s was Watergate. In a way, still influences…you get every little stringer dying to get answer to “when did you know? and “when did you cover it up.” “IT” always the next “got ya'” moment” they’ll be famous for. Sad fact: there are extremely few moments in life like that. Fewer of those moments lead to anchor jobs at KNBC and a 6 figure salary. But a reporter (the one or two left) lives in eternal hope of being the next sensation.

100 M August 16, 2016 at 2:27 pm

The result as I would read it:

Mostly Scandinavian countries generally have high levels of trust between citizens.

This is because they are egalitarian.

Because they are egalitarian, they rarely go hard in wage negotiation, for either employers to strip wages down to the bone, or individuals or unions to build wages up high.

Thus also less need for minimum wage regulation.

This fits with the United States pattern – increasingly Libertarian social attitudes (everyone negotiates hard at the best deal for themselves, personally, or else flits to whichever job offers them personally the best deal) and decreasing egalitarian norms, thus, increasing desire among at risk subsets of the population for government interventions.

When egalitarian and counter-Libertarian social attitudes become common again, trust may rise, and desire for wage regulation may decrease (because people will actually trust their employers and fellow citizens to give them a good deal and be other than self obsessed and self interested actors).

101 jeff Michka August 16, 2016 at 7:20 pm

Planning to buy Facebook and Twiiter, then close them both so the echo chambers the vast unwash live in are smaller? Self-obsession in a hug industry in the States. Against economic development and enriching Mark Zuckerberg?

102 Per Kurowski August 16, 2016 at 5:22 pm

When risk adverse regulators distrust bankers to clear for perceived risks, and so also require banks to re-clear for those same risks in the capital, they condemn our economies to stagnation

http://teawithft.blogspot.com/2016/08/the-regulators-distrust-of-bankers-is.html

103 Ryan Reynolds August 16, 2016 at 8:09 pm

It would seem a pretty quick and simple extension to this concept to test the levels of ‘trust’ across the political spectrum. One could hypothesise that the adherents of the hard left and the insular right both exhibit high levels of distrust, and as a result, reach for strong arm legislative solutions to correct those instincts (whether that’s heavy corporate regulation on the left or strong individual rights on the insular right).

104 Fred August 16, 2016 at 11:58 pm

Television as a contributing factor.

105 tom merle August 17, 2016 at 1:53 pm

How do these findings square with the Nordic countries ethos?

106 Beto s August 19, 2016 at 1:07 am

That R^2 is pretty low :/

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