July 21, 2021

IT'S A 60-40 NATION:

Are Americans More Trusting Than They Seem?: Political scientists say that our confidence in our institutions--and in one another--is running perilously low. Economists see a different story. (Idrees Kahloon, July 19, 2021, The New Yorker)

If trust appears to be languishing in the political realm, though, it appears to be thriving in another important institution of modern society--capitalism. The modern sharing economy is premised on leaps of faith in perfect strangers: we rely on crowdsourced restaurant reviews on Yelp, climb into a stranger's car through Uber, stay at someone else's house via Airbnb, and look for love on Bumble, Hinge, and sundry other dating apps. A financial-trust index set up by the economists Paola Sapienza and Luigi Zingales during the Great Recession has shown consistent growth in the past decade. The supply of money has more than doubled since the recession, and yet we've seen few paroxysms of goldbuggery or other disorders of mistrust. Interest rates, which rise when investors lose trust in repayment, remain close to zero. What's really going on?

People don't see the phenomenal trust embedded in the modern economy for the same reason that David Foster Wallace's fishes could not fathom water: everything is predicated on its existence. Adam Smith concluded that trust was a fundamental feature of humanity. ("Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog," he wrote in "The Wealth of Nations.") Kenneth Arrow, just before winning a Nobel Prize, extolled trust as a "lubricant" of a social system, an "extremely efficient" mechanism for easing transactions and promoting prosperity. "Unfortunately this is not a commodity which can be bought very easily," he warned. "If you have to buy it, you already have some doubts about what you've bought." Even in the aftermath of the Great Recession, Joseph Stiglitz, the tireless critic of inequality (who has a Nobel Prize of his own), observed, "It is trust, more than money, that makes the world go round."

Ask yourself the simple question "What is money?" and you'll have to come to grips with the fact that, at least since the dollar came off the gold standard, in 1971, our currency has been nothing more than trust itself, its value sustained by the power of communal belief. The humble, crumpled dollar bill in your pocket evokes the concept: "In God we trust." Less grandly, the thing you're trusting is the full faith and credit of the United States government. Fractional-reserve banking, which allows a bank to lend far more in credit than it has in deposits, has driven capitalism for centuries. Many economic crises, when examined closely, turn out to be crises of confidence. This is obviously true of a bank run, when depositors lose faith in the fractional-reserve system, but it's also true of hyperinflationary spirals, when worries about a country's handling of monetary policy yank down the value of its currency. There is a reason that the core language of commerce--of bonds and credits--is all about belief.

We had to travel last week and every single person at every airport was wearing their mask.  The military unit we saw was not just multiethnic and mixed-gender but soldiers posed for pictures with their native flags--Mexico, Costa Rica, Puerto Rico-- gays and lesbians serve openly, and there are military-issue hijabs. America is not Left/Right.  It is American. 

Posted by at July 21, 2021 7:38 AM