Levels of "social trust" more important predictor of GDP growth than human capital, technological advancement/Nudge

[birdman12345]

I think this is super interesting. This guy who is the head of the UK’s “nudge” unit ( https://en.wikipedia.org/wiki/Nudge_theory ) thinks that social trust is a bigger predictor of gdp growth than anything else. Intuitively it makes sense that theres a correlation between societies being beneficial for all of the people participating in them, thinking things are fair, and them advancing and people thinking they can legitimately move forward and working to better their place in the societies. It also interests me given the fracturing of society and politics that seems to have happened over time, the increasing compartmentalization of social networks with their views, politicians not being willing to compromise, and in my view the increase in income inequality (not causal) and slowing gdp growth (I suspect causal). They think that increasing social trust is how to increase growth and efficiency economically.

PUTNAM: Some parts of Italy are way more efficient than any state in America, and other parts of Italy are way more corrupt than any place in America. And the question is why? Why are some places better governed than others?

It was the degree to which there was a dense, civic network in a community. If there was a dense, civic network, so that people in those places behaved with respect to one another, in a trustworthy way, their governments worked better. And I dubbed that concept “social capital.”

_DUBNER: So you write this about low trust: “ Low trust implies a society where you have to keep an eye over your shoulder, where deals need lawyers instead of handshakes, where you don’t see the point of paying your tax or recycling your rubbish since you doubt your neighbor will do so, and where employ your cousin or your brother-in-law to work for you rather than a stranger who’d probably be much better at the job. ” So that has all kinds of business and ultimately economic implications. However, when you talk about high trust being good for us on a personal level, whether it’s health or individual income, do the two necessarily go in hand? In other words, can we have a society that has a business climate where there isn’t a lot of trust and, therefore, you do need all those lawyers instead of the handshakes, but where you have good social trust among neighbors, family and friends, communities and so on, or are they really the same thing that you’re talking about?

_

Its interesting to note that apparently social trust is decreased by diversity.

GLAESER: A lot of the cheating was across racial and ethnic lines. And this was primarily white on Asian, meaning the whites were cheating the Asians. And I think there are lots of cases in the world in which we’ve seen racial fractionalization be related to less-than-perfectly functioning social relations.

DUBNER: Do you think that more ethnically homogenous societies — you know, one argument behind Scandinavian economic and social successes is that they tend to produce better social outcomes, and do you think there’s evidence for that?

GLAESER: I do. It is true for example, that welfare states are both more generous in ethnically homogenous places, and it’s almost assuredly true that they’re also more functional. They function better in more ethnically homogenous places. It’s just easier in lots of ways. There are downsides to that. I mean, I happen to love Stockholm. It’s a great city, but certainly one can argue that small, homogenous places are not necessarily as creative as they might be.

http://freakonomics.com/podcast/trust-me/

Levels of social trust, averaged across a country, predict national economic growth as powerfully as financial and physical capital, and more powerfully than skill levels – over which every government in the world worries about incessantly. It is also associated with many other non-economic outcomes, such as life satisfaction (positively) and suicide (negatively). In short, it’s not much fun living in a place where you don’t think most other people can be trusted. Low trust implies a society where you have to keep an eye over your shoulder; where deals need lawyers instead of hand-shakes; where you don’t see the point of paying your tax or recycling your rubbish (since you doubt your neighbour will do so); and where you employ your cousin or your brother-in-law to work for you rather than a stranger who would probably be much better at the job.

http://www.behaviouralinsights.co.uk/uncategorized/social-trust-is-one-of-the-most-important-measures-that-most-people-have-never-heard-of-and-its-moving/

[anon47629474]

i didn’t read this but i believe it whole heartedly as a business owner. the amount of wasted time and energy making sure you don’t get screwed is mind numbing. only beneficiaries are lawyers. Contracts used to be a couple pages (before my time but I’m told), now you need a 30 page agreement to cover every contingency.

[ohai]

Could it also be that countries with growing economies will have happier citizens who are experiencing those gains?

[birdman12345]

They went into that a bit.

Some people and some countries seem to use their wealth more to find ways of connecting more to other people. And the technology has both these capabilities and we can’t just blame it. It’s the choices we’re making and how we use it and the technology which we’re, kind of, asking and bringing forth.

DUBNER: It reminds me a bit of — we once looked into the, kind of, global decline of hitchhiking, for instance. One of the central reasons being that people no longer trusted strangers to not kill each other, really, is what it boiled down to, even though there was apparently very little killing involved, but just the fear of one. And yet now, Uber is a 60-some billion-dollar company that’s basically all about using technology to lure a complete stranger into your car, which, I guess, argues, if nothing else, the fact that technology can be harnessed very much in either direction.

HALPERN: Indeed, so, as you say, there’s actually two points here, and there’s a really important behavioral one, which I think we’ve only figured out in recent years to bring together these different literatures, how does it relate to behavioral scientists versus those people studying social capital. We look like we have certain systematic biases about how we estimate whether we think other people can be trusted.

In essence, we overestimate quite systematically the prevalence of bad behavior. We overestimate the number of people who are cheating on their taxes or take a sickie off work or do other kinds of bad things. This doesn’t seem to be just the media, although that may reinforce it, it seems to be a bit how we’re wired as human beings. So why is that relevant and why does this have to do with technology? Technology can help you solve some of those issues. So when you’re buying something on eBay or you’re trying to decide where to go using, you know a Tripadvisor, you’re actually getting some much better information from the experiences of other people as opposed to your guesstimate, which is often systematically biased.

_ So it turns out it’s a way we can sometimes use technology to solve some of these trust issues. Not just in relation to specific products and “Shall I buy this thing from this person?” but, potentially, more generally in relation to how do we trust other people because, ultimately, this social trust question must rest on something. It must be a measure of actual trustworthiness.

_

I don’t want to make this political but I’m also reminded by this next piece of descriptions of some real estate developers who won’t go named that have histories of breaking contracts, not paying on time, making contractors bring them to court in order to make the people pay up and then trying to settle out of court for lesser amounts etc.

GLAESER: Trust is everywhere in economic transactions. So we wanted to contribute to this literature. And one of the things that seemed very important to us was measuring trust, was measuring social capital.

They also described how levels of social trust do correlate with other things, and though there isnt necessarily a causal link, I do suspect that higher

PUTNAM: The core idea of social capital is so simple, that I’m almost embarrassed to say it. It is that social networks have value. Social networks have value first of all to the people who are in the networks. For example, there’s a huge amount of work on how social networks help us find jobs.

They have effects on bystanders and not just effects on the people in them. Communities that have high levels of social capital benefit in many ways. Their kids do better in school. They have lower crime rates. They have, other things being equal, higher economic growth rates. Many, many benefits both personally and collectively.

A big question to me is what can be done to increase “social trust.” These dudes suggest that governments can do some bit to help it along.

HALPERN: Well, I mean, one of the characteristics of the Netherlands, and you have to be a bit careful when you pick off one country, is it has wrestled quite hard with the issues of, not just inequality, but social differences. They’ve really tried to do a lot in relation to making people essentially build cohesion.

_Particularly Amsterdam, is a very famous area for — it’s long been an extremely multicultural city. It’s had issues over that over time, but they’ve really in a sort of succession of governments have tried to quite actively make groups get along with each other in quite an active way. So that may itself, of course, root in the Netherlands, it’s quite a deep culture of strong sense of the law, being trustworthy and that contracts will be honored and so on. It’s what helped to power its economic success in previous centuries, so it does have that tradition also to draw on.

_

They also shit on technology and television, saying that it decreases social cohesion. They apparently think that people should be participating in civic organizations instead with that free time. I think that personally, I’d probably feel more comfortable dealing with a bunch of mormons in general, because I feel like theyd be on the level with stuff and stick to contracts, as opposed to say having to grease palms in NYC real estate. Its a cultural thing. Different norms. I think that social media is, as that dude said recently, compartmentalizing people and making things more divisive and breaking apart the social cohesion of the country, making it harder for politicians to get shit done. It seems like this needs to take place at a personal civic level though.

I get the feeling that its causal both ways. It causes growth, and it also is easier to develop when things are growing (or at least stable). I also suspect that in times when theres less growth on a micro level, when macro growth stagnates, inequality becomes more of a problem because people aren’t seeing the growth and bettered lives. And people are thinking that their kids arent doing better than they did, people getting squeezed and inequality increasing etc, fewer “good jobs,” more people moving to shitty jobs as things become more automated, the world becoming flatter etc.

[anon47629474]

entities are too big, including government. need to localize. boils down to what people (consumers) value. We’ve been brainwashed into thinking having more cheap stuff = more happiness, so that’s what the system is built to provide.

[birdman12345]

cw, I agree with your first posts. I’m not sure about the link between more cheap stuff and less social trust though. I dont see them as mutually exclusive, but I may be wrong.

You should post more normal stuff like this. Less of the ufos and the weird shit.

[anon47629474]

people are willing to deal with the unseen problems with bigness in exchange for being able to consume more, cheaply. Economies of scale requires scale. So businesses get bigger and bigger. Then big entities (think Walmart) transform communities. People no longer buy from people they know, they buy from faceless entities and social trust erodes. I think people are starting to better understand the cost side of cheapness and are reacting appropriately. In any case this dynamic may have little to do w maximizing GDP growth but I think definitely is related to maximizing happiness.

Also aliens are real.

[GorillaNerd]

its like when people value companies not based on their profitability, but their ability to gain users aka “user trust” amritie69?

[Matt_Likes_Analysis]

Industrial Society and Its Future?

[system]

I knew a famous IBer who said “as trust goes down, costs go up”. True.

However the mistake is the obsession with GDP. If high GDP fixed everything, America would be a wonderland, not a shithole.

@Matt_Likes_Analysis

Industrial Society and Its Future?

Yup, Ted was right about everything.