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Credence Book Summary

What Economics Gets Wrong About Trust, and How to Get It Right

by Katherine Hawley


What Economics Gets Wrong About Trust, and How to Get It Right

Katherine Hawley


In ‘Credence,’ Katherine Hawley delves into the complex world of trust within economic systems. Challenging conventional economic theory, she argues that trust isn’t merely a transaction or a matter of rational calculation, but rather a nuanced social phenomenon with profound implications for how markets function and societies thrive. Hawley explores the factors that foster and erode trust, examining the roles of institutions, social norms, and individual experiences. She advocates for a more holistic understanding of trust in economics, one that acknowledges its multifaceted nature and its crucial role in shaping economic outcomes.

Table of contents

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Author & Writing Background

Katherine Hawley is a renowned philosopher and economist, currently serving as a professor of philosophy at the University of St Andrews. Her research interests lie at the intersection of philosophy, economics, and public policy, with a particular focus on trust, social norms, and economic justice. Hawley is known for her clear and engaging writing style, making complex philosophical and economic concepts accessible to a wider audience. ‘Credence’ builds upon her extensive scholarship in these areas, offering a thought-provoking analysis of the role of trust in modern economies.

Key Takeaways

The Limitations of Traditional Economic Models

Hawley critiques standard economic models that often portray trust as a simple calculation of risks and rewards. She argues that this approach overlooks the social and cultural dimensions of trust, which are essential for understanding its dynamics in real-world economic interactions.

Trust as a Social Phenomenon

The book emphasizes the social nature of trust, highlighting how it is shaped by shared norms, institutions, and personal experiences within communities. Hawley explores how these factors contribute to the development of trust or, conversely, lead to its erosion.

The Importance of Institutions

Hawley examines the role of institutions in fostering trust. She discusses how well-functioning legal systems, regulatory bodies, and social safety nets can create an environment where trust is more likely to flourish.

The Impact of Social Norms

The book explores how social norms and cultural values influence trust. Hawley demonstrates how societies with strong norms of reciprocity and cooperation tend to have higher levels of trust, which benefits economic interactions and overall well-being.

The Role of Personal Experiences

Hawley acknowledges that individual experiences play a significant role in shaping one’s propensity to trust. Past interactions, both positive and negative, can influence an individual’s level of trust in others and institutions.

Trust and Economic Outcomes

The book demonstrates the link between trust and economic outcomes. Hawley argues that higher levels of trust within a society are associated with greater economic prosperity, innovation, and social cohesion.

Building and Maintaining Trust

Hawley provides insights into strategies for building and maintaining trust. She emphasizes the importance of transparency, accountability, and fairness in economic interactions.

Rethinking Economics with Trust at the Center

Hawley calls for a paradigm shift in economics, advocating for a more nuanced understanding of trust and its implications for economic theory and policy.

FAQ about Credence

What is the main argument of ‘Credence’?

The central argument of ‘Credence’ is that trust plays a fundamental role in economic systems, and that traditional economic models fail to adequately account for its complexity and social dimensions. Hawley argues for a more holistic understanding of trust that recognizes its impact on economic outcomes and societal well-being.

How does the book define trust?

Hawley defines trust as a complex social phenomenon that involves a willingness to be vulnerable to the actions of others based on the belief that they will act with goodwill and integrity. It is not simply a calculated risk assessment but rather a multifaceted concept shaped by social norms, institutions, and personal experiences.

What are some examples of how trust influences economic outcomes?

The book provides numerous examples of how trust impacts economic outcomes. For instance, higher levels of trust are associated with increased investment, innovation, trade, and economic growth. Conversely, low levels of trust can lead to economic stagnation, corruption, and social unrest.

What are some of the key factors that contribute to building trust?

Hawley identifies several factors that contribute to building trust, including transparency, accountability, fairness, reciprocity, and shared norms of cooperation. Institutions and social structures that promote these values are more likely to foster trust within a society.

How does the book challenge traditional economic theory?

‘Credence’ challenges traditional economic theory by arguing that trust is not simply a rational calculation of self-interest but rather a social phenomenon with deep roots in cultural norms, institutions, and individual experiences. Hawley critiques the limitations of standard economic models that fail to capture the full complexity of trust and its impact on economic behavior.

Credence Quotes

  • “Trust is not just a lubricant that makes the economic engine run more smoothly; it is the fuel that powers it.”
  • “We need an economics that takes seriously the idea that human beings are not simply rational calculators of self-interest, but also social creatures who care about fairness, reciprocity, and the well-being of others.”
  • “Building trust is a slow and painstaking process, but it is essential for creating a just and prosperous society.”