THE headline on this piece overpromises. I don't know how exactly to flip a low-trust society to a high-trust state. No one does, sadly. The question is one of the most important in economics</strong>, however. Poor societies are mostly poor because of a lack of trust</strong>. The laws and institutions that facilitate market transactions and long-run investment survive and work because of broad public buy-in: the common belief that rules should generally be followed because others will generally follow rules.</strong>
This week's Free-exchange column</a> looks at how new technologies are affecting trust relationships. The topic is a hot one at the moment; Tim Harford</a> and Tyler Cowen</a> recently wrote on similar themes. It seems to me that technology affects the role of trust in society in a few different ways. Technology can breed familiarity where it had not been before</strong>. Good experiences using ridesharing services alongside others of different backgrounds could help chip away at prejudice. On the other hand, technology often facilitates a retreat into homophilic groups, in ways that can harden boundaries between groups. We certainly observe polarisation into like-minded groups in online communities, for instance. Whether that is more important than the sense of connection we feel with people live-tweeting rescue operations after a natural disaster a half a world away is hard to tell.
Technology also encourages changes in personal habits that make trusting relationships easier or harder to build in other areas of life. Interactions with machines could be de-socialising, for instance; we might grow accustomed to being rude</strong> to our personal digital assistants, or too lazy</strong> to muster the social grace needed to speak with the human customer-service agent rather than the robot one. On the other hand, growing reliance on public ratings and reputation rankings could make us more conscious of our behaviour and kinder to others. (Smartphone video seems to be having an effect something like this on law enforcement officers.
These things matter. They could end up mattering a lot. But when it comes to world historical questions concerning which countries will grow rich and which countries will stay poor, these seem to me to be relatively minor factors.
What's a major factor? Well, some innovations reduce our dependence on trust as an economic tool entirely: by making it easier to verify information about strangers</strong>, or monitor economic partners, for instance. Money itself is a technology like this; by making it much easier for anonymous strangers to transact, money enables far more economic activity to take place than could have been possible in a world of barter or personal credit. Or take a more recent exmaple. A half century ago, if you were an industrial firm thinking about locating production in a different country, you either had to accept the risk that production might not occur on schedule, that the foreign plant would overcharge you, or that when the products showed up they were poorly made or not to specification; or you had to know you had a partner in that country that you trusted implicitly. Such partners could be developed, but only over long periods of time, as small investments and interactions occurred successfully enough to lay a groundwork for bigger and more valuable cooperation. It is impossible to imagine the explosive growth in supply-chain trade over the last generation, and the corresponding boom in China, taking place without the development of technology that allows firms in rich countries to keep close tabs on what exactly is being produced with what inputs and to what specifications in factories on the other side of the world. Technology took trust out of the equation, and that, in turn, allowed much more economic activity to take place.
There is a limit (for now, at least) to how rich countries can get by relying on technologies to make up for their trust deficits. The supply-chain boom is running out of steam, for instance, and emerging-market growth is much slower now than it was a decade ago: scarcely faster than rich-country growth in many economies. That's worrying; in the decades before the great supply-chain boom many fewer countries managed to grow</a> fast enough for long enough to become rich, and it took those that did a very long time.
Perhaps more importantly, the difficulty and time involved in making that leap to developed status does not seem to have been a result of the challenge of building up the trust and institutions needed to support development. It was a slog because it took a while to build up the broad set of industrial competencies needed to grow rich in an era in which tapping into existing supply chains was not an option. But that slog only really happened in countries, like Japan and Ireland, which already had a relatively strong foundation of social capital. As hard as development was in the places that managed it, building a society with the high-trust social equilibrium needed to support that development far more difficult: the work of centuries.
Can technology create ways to accomplish in decades in places with low levels of trust what took centuries in the countries we now consider rich? Maybe it won't need to. Maybe things like the blockchain</a> will allow people living in countries in which neither the state or society are capable of enforcing contracts or securing a reliable payments system to enjoy access to the infrastructure needed to operate a complex economy. Yet clear title to a house will not matter for much if a neighbour with guns can come and take everything in it without fear of state or social reprisal. Social capital is bound to remain of critical importance for some time.
Ultimately, high-trust societies are positive equilibriums</strong>, in which most people behave as they should because the gains to behaving as they should are higher than the gains to defecting</strong>. To raise the share of people living in such equilibriums, we have a few options. We can allow more people to move to places where there is already a good equilibrium: to immigrate to rich countries, effectively. We can carve out places in bad-equilibrium countries, like Paul Romer's charter cities</a>, and seed those new communities with a population primed to coordinate. Can we do more?
I am weirdly heartened by the phenomenon of Pokemon GO</a>. Why? The game demonstrated how something as simple and silly as a diversion on a mobile phone could lead to coordinated activity in the real world</strong>. In the midst of the fad, people reported odd and wonderful behaviour: strangers gathering in dark parks in the dead of night, for instance, playing the game and interacting in positive fashion with others in places that would normally be threatening. Such an utterly trivial thing seems an unlikely route to a dramatic change in the social and economic status of poor, violence-battered countries in sub-Saharan Africa. But there are lessons in Pokemon GO which maybe, one day, might be brought to bear in developing economies where there are more smartphones than long-run investment opportunities. Mobile games can be used to build trust, and to coordinate a new social equilibrium in the real world. It sounds ridiculous: that something like an online game could be used to get people who would not normally trust each other to interact and build social connections.</strong> Maybe it is. But trust is about coordination</strong>. It is about getting everyone on the same page. Flip enough people within a community into a good equilibrium and maybe, just maybe, it will stick.</strong> Games are as good a way as any to accomplish that; even in war-torn countries the occasional football match breaks out. If technology ever succeeds in helping us to build trust where it is missing, I suspect the wizardry that manages it will work in part by harnessing the spirit of Pokemon GO.</strong>