On Neuroeconomics of Trust

In the Article “Neuro-economics of Trust” Paul J. Zak proposes alternatives to rational choice model. Although rational choice model has gained a lot of popularity with the rise of capitalism it is easily observable that humans do not always act accordingly. Zak explains a game in which two people start the game with 10 dollar in their pockets. Person 1 (P1) can choose to give any amount (0 to 10) to Person 2 (P2). Anything P1 gives to P2 will be tripled. Then P2 can decide to give any amount back to P1 (it won’t be tripled this time). Game theory or the rational choice theory suggest that by solving this problem backwards we should arrive at the conclusion that P1 will not give P2 any money because P2 will keep all the money P1 sends since they prefer more money to less. But when conducting an experiment we see that humans tend to trust each other and reciprocate that trust by being trustworthy. Zak observed that almost all the subjects (P1’s) placed trust by sending money and their partners reciprocated by sending some of the money back to them. He proposes that oxytocin playas important role in trust and reciprocality. The subjects who receive intentional trust signals showed higher oxytocin levels which resulted in a temporary attachment between partners and caused P2 to reciprocate. His finding (biological underpinnings of trust) seem to suggest that human beings are innately inclined to display pro social behavior (in this case reciprocate trust). Do you think we trust or reciprocate (display pro social behavior) because we are hard wired to do so or because we learned to do so after years of education by our parents and society? Or if we were to fit this into the rational choice model, can pro-social behavior just be another strategy to maximize our gains (social acceptance, likability, etc.) ?

Here is the TED Talk version of the article: www.ted.com/talks/paul_zak_trust_morality_and_oxytocin

Placing ourselves in the others mind is an especially important aspect of this experiment. I think we tend to assume that most people are innately similar or wired to react in somewhat similar ways. So, we say “If I were him I would reciprocate by sending the money back” and decide accordingly. I think the precondition for someone being trusting is that person being trustworthy himself. In my experience trust and distrust are learned traits. People who have been exposed to negative experience, in other words people who haven’t experienced reciprocality in the past tend to be less trusting. Correspondingly, adults tend to be less trusting than children. I would want to see whether P1 would still give money to P2 in a second round of the experiment after a staged experiment where their partner does not reciprocate.

I also want to tie this to the article we read on income equality. Zak also mentions that as income equality rises it’s likely that one’s partner will become less trustworthy due to differences between parties to exchange. We know that as social beings trusting in people or in other words forming attachments based on trust makes us feel good. In her book “Why Equality is Better for Everyone” , Kate Pickett and Richard Wilkinson build a strong correlation between equality and happiness. Their argument is that after a certain threshold (basically once you have the most basic resources) being richer doesn’t make a country happier. Instead how equal countries are the deciding factor in how happy the citizens of that country are. Countries with the lowest wage gap (equal countries) suffer less from negative consequences such as drug abuse, mental health problems and excessive consumption. After these readings, I think trust can be the middle step between equality and happiness.

The book can be found at : www.amazon.co.uk/The-Spirit-Level-Equality-Everyone/dp/0241954290