In the 1947 movie,“The Hucksters”an advertising executive (Clark Gable) tricks a talent agent (Edward Arnold) into a wager that results in Arnold’s agent’s turning over his contract to represent a mediocre performer, Buddy Hare (Keenan Wynn). That contract had suddenly become valuable because Clark Gable’s boss wanted Hare to star in a new show — something Gable knew but Arnold didn’t.
Arnold found out that he had been tricked but he turned the contract over anyway … because he had given his word.
Nearly a half century later, in the 1996 movie, “Jerry McGuire,” Tom Cruise played a sports agent trying to go it alone after being fired from his large agency. Among his other difficulties, he loses a deal with a sought-after rookie quarterback when the kid’s father (Beau Bridges) ignores his promise, his word, which was supposedly “just like his handshake; stronger than oak,” and signs with Jerry McGuire’s rival.
In the 49 years between the two films, America had changed. It had moved from a nation where a person’s word was important, and a source of trust, to a “get it in writing” world trusting only documents — contracts to be pored over by parsers and litigators.
Much of the decline in trust has been all too visible. There are few institutions that remain untouched by lessened public trust. Those where trust was at the deepest core of our relationships — religion, medicine and law enforcement are perhaps the most hurtful. In some cases, the decline has been marked by a direct betrayal of trust, and in others it has just been a gradual erosion punctuated by the behavioral failures and character flaws of individuals.
The shift from trust to the written word has limitations. Contracts, however legally binding and enforceable, are a poor substitute for trust in our economy, our society, or, most certainly, in our personal lives. It seems likely that there are costs attached to this substitution and that we are beginning to see those costs today.
Calculating that cost raises some practical questions such as how to measure trust. While there clearly has been a decline in trust, we cannot tell how much unless we have some way to measure it. And, even after we have developed an acceptable way to measure trust, it is even more important to establish whether the decline in trust is a cause or an effect, for that is far from clear.
Such questions do not trouble everyone, of course, and apparently have not occurred to the International Monetary Fund, which sees not only a clear line of causality between the decline of trust and economics but also a cure for this poisonous relationship in fiscal policy.
A recent report by the IMF, “IMF Fiscal Monitor: Tracking Inequality,” blames income inequality for, among other things, the decline of trust in modern societies and believes that it could be reversed by income redistribution policies such as “…the introduction of universal basic income.” Universal basic income is one member of an increasingly large family of government programs that involve using tax revenue to bolster the incomes of those who cannot or will not support themselves. In the U.S. the programs have recently been known as the Guaranteed Annual Income.
There are a couple of things that are questionable about the statistical evidence that the IMF uses to support its view, though. The first is the reliance on time-series correlation studies, which are notoriously untrustworthy as far as revealing cause-and-effect relationships. Just because two things rise and fall together over time doesn’t mean that one caused the other — or even that they are related at all.
The second thing is more technical. Setting aside the causality question for the moment, the correlation between income inequality and declining trust isn’t consistent across the sample, which raises questions about how reliable it is. This in turn, raises questions about how reliable a cure redistribution might be.
Economists Ander Steijn and Bram Lancee at the University of Amsterdam looked at the available data and came up with a conclusion very different from the IMF report. In their research paper they wrote, “We find no significant effect of inequality on trust when taking into account national wealth.”
It is difficult to believe that writing checks to people will increase their trust in anything, or, for that matter that paying people to do nothing will spur the growth of our economy. It would be reassuring to have some stronger evidence.
What is wiser to believe is that our trust in institutions and each other is far too important to be left to big data. And it cannot be purchased as if it were some sort of cyber Monday doorbuster. Trust me on this.
James McCusker is a Bothell economist, educator and consultant.