Schneier on Security
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September 5, 2013
The Effect of Money on Trust
Money reduces trust in small groups, but increases it in larger groups. Basically, the introduction of money allows society to scale.
The team devised an experiment where subjects in small and large groups had the option to give gifts in exchange for tokens.
They found that there was a social cost to introducing this incentive. When all tokens were "spent", a potential gift-giver was less likely to help than they had been in a setting where tokens had not yet been introduced.
The same effect was found in smaller groups, who were less generous when there was the option of receiving a token.
"Subjects basically latched on to monetary exchange, and stopped helping unless they received immediate compensation in a form of an intrinsically worthless object [a token].
"Using money does help large societies to achieve larger levels of co-operation than smaller societies, but it does so at a cost of displacing normal of voluntary help that is the bread and butter of smaller societies, in which everyone knows each other," said Prof Camera.
But he said that this negative result was not found in larger anonymous groups of 32, instead co-operation increased with the use of tokens.
"This is exciting because we introduced something that adds nothing to the economy, but it helped participants converge on a behaviour that is more trustworthy."
He added that the study reflected monetary exchange in daily life: "Global interaction expands the set of trade opportunities, but it dilutes the level of information about others' past behaviour. In this sense, one can view tokens in our experiment as a parable for global monetary exchange."
Posted on September 5, 2013 at 1:57 PM
• 9 Comments
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I am not surprised about the findings. Family units and small tribes work by knowing everyone. As society scales, you have to deal with strangers and you need new solutions. Money, reputation, trusted intermediaries are some of them.
I am not sure I agree with your summary though, that money reduces trust (causation).
That could be true in a limited sense, but not in a broader view (the existence of money increases cooperation with strangers).
In the experimental setting, people had already been conditioned (growing up) to use money in settings with strangers, while money is often un-necessary with close friends or relatives.
So it could be that when money is introduced in the experiment, they mentally switch modes. In that interpretation, money is only cause of reducing trust in a limited sense. Rather it is mentally associated with reduced trust situations.
Furthermore, there may be other modes of voluntary interaction than those two.
Money is just a technology invented to solve a problem for certain situations. Different forms of contracts, patterns of cooperation and other technologies are still emerging to help us achieve our goals while dealing with the reality of risks.
I finally read the paper. What a load of tosh.
They used a completely different system than actually exists for their experiment.
Why are economists so weird? They don't event understand the money system we use, so they just invent a parallel universe in which things are different but fit their beliefs.
Jeez. No wonder we are in trouble. Economists are some crazy religion.
If there is anything to be learned from this study it is economists are untrustworthy.
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