A Cognitive Theory of Trust
62 Pages Posted: 13 Dec 2005
Date Written: December 2005
Interpersonal trust is currently receiving widespread attention in the academy. Many legal scholars incorrectly assume that interpersonal trust is an unmitigated good (or bad) and that legal policy should therefore be crafted to maximize (or minimize) trust. A more nuanced understanding of trust indicates instead that it should be promoted or discouraged, depending on the context. Such an understanding needs to reflect the fact that trust and distrust can, and often do, coexist. In most relationships, the parties trust one another with regard to some matters and yet distrust one another with regard to other matters. More specifically, developing a relationship with somebody often involves acquiring an overall residual sense of how trustworthy the person is, as well as a specific sense of the person's trustworthiness in particular contexts. Our paper begins to develop a cognitive theory of trust. Our cognitive lens suggests specific types of relationships and contexts in which people are systematically inclined to trust one another nonoptimally. First, some accurate trust assessments may be socially nonoptimal. Consider a group whose members decide to forego costly assessments of strangers, confining their dealings to other group members. Or parties engaged in socially undesirable activities whose high trust for one another permits them to effectuate successful criminal conspiracies. In these cases, social gains can be realized by enacting regulatory measures that provide incentives for either trust-enhancing or trust-decreasing behaviors. Second, some relationships are plagued by mistaken initial trust assessments in contexts where accurate updating of these assessments is either precluded or impaired. In such contexts the law should intervene to either promote more accurate trust levels or to mitigate the costs of the mistaken assessments. We identify two relationships where, if left unregulated, one of the individuals will likely inaccurately assess the trustworthiness of the other. In the corporate management context, directors are inclined to overtrust officers, and we explore possible mechanisms for promoting specific types of distrust on the part of directors without excessively eroding the residual trust in the officer-director relationship. In doctor-patient relationships, patients similarly overtrust doctors albeit for different reasons. Because patients often benefit from overtrusting their doctors, however, promoting more accurate patient trust assessments likely would prove costly. Health care law should (and does) instead focus on promoting doctor trustworthiness and compensating patients who suffer harm from misplacing their trust.
JEL Classification: K22, I18
Suggested Citation: Suggested Citation