1. Networks, Norms and Trust: The Social Psychology of Social Capital to appear in Social Psychology Quarterly, March 2005 Karen S. Cook Department of Sociology Stanford University, U.S.A.

2. Why Focus on Trust? Fukuyama (1995) and Putnam (1996) among others examined role of trust in economic performance of societies and in maintaining the viability of democratic forms of governance Trust is “ at the heart of social order ” - (Luhman 1979) and essential to the conduct of everyday life Without trust - must rely on institutions, government or the military - may breed distrust

3. What does social psychology have to say about trust at the micro level? What is the role of trust in society? Does it facilitate cooperation and exchange? Under what conditions? Must we rely on trust? Is it a form of social capital or a consequence of social capital?

4. Trust as Relational Trust is grounded in ongoing relationships If we value maintaining a relationship we will behave in a trustworthy manner If we do, the other will trust us recognizing our incentive to maintain the relation Called the “ encapsulated interest ” model of trust (Hardin, 2002)

5. From Norms to Networks Resurgence of interest in trust lies in a social fact: a major difference between life in small isolated communities and in large complex societies (Blau 2002) Declining significance of groups into which one is born Growing significance of reciprocated choices between strangers for social relations

6. Norms to Networks cont. The types of norms that control behavior in tight knit communities not effective in far- reaching world of networked social relations What forms of social control work in a networked society? Trust and trustworthiness enter the picture

7. Social Exchange - Uncertainty and Risk Distinguishing feature of social exchange is uncertainty - e.g. about future reciprocation Potential exchange sustained by expectations of future returns Obligations are diffuse and uncertain, carry risk (e.g. of defection or exploitation - “ opportunism ” - thus trustworthiness matters and ability to assess it

8. Trust and Social Exchange Blau (2002) - “ Diffuseness of obligations implies that large-scale social exchange is not likely without formal agreement unless social bonds rooted in trust have been established. ” Empirical evidence that reciprocal exchange leads to trust: Molm et. al. (2000, 2003)

9. Social and Economic Exchange Emerson: social exchange focuses on the relation, economic exchange on the transaction Types of exchange: negotiated, reciprocal (or non- negotiated), generalized Outside laboratory forms are mixed, more complex, dynamic Relational view of exchange linked to relational view of trust

10. Recent work on trust and exchange Yamagishi et.al. 1998, Cook et. al. 2005 (on risk and the development of trust relations) Lawler et. al. (1996, 1998, 2000) relational cohesion and affect - derivatives of positive social exchange and basis for solidarity Molm et. al. (2000, 2003) -modes of exchange as determinants of relations - degree of power use, reciprocity, trust

11. Economic Exchange Relations Move to study trust in games (typically one shot -- study of risk not relational trust) Earlier work on relational contracting is relevant (Macneil, Macaulay) Social relations as contexts for economic transactions (e.g. Granovetter in sociology) McMillan and Woodruff -Vietnamese “ teahouses ” as sites of relational trade

12. Link between social exchange relations and social capital Relations of social exchange among networked actors are one form of social capital (separate from norms) Lin (2002) - social capital - defined as the diversity of resources that can be accessed through network ties Social capital - has one clear empirical referent in this formulation

13. Lin versus Putnam For Putnam: Social capital is “ networks, norms and trust ” Networks that provide access to resources Social (or communal) norms that control behavior and impel collective action for group benefit Trust - factor that limits exploitation and facilitates exchange

14. Conceptual and Empirical Complexity Putnam ’ s definition “ kitchen sink ” - problems with theory and empirical evidence, hard to specify mechanisms What aspect of social capital is at work? Thus treat social capital as Lin does: as access to resources through network ties Exchange networks, social support networks, affiliation networks, job search nets, etc.

15. Need for a Theory of Trust What is the basis of social control in networks? What recourse do actors have to failed transactions or exploitation? Trust comes into play when there is risk When risk is low, familiarity is high, often communal norms work to constrain behavior - trust is “ redundant ”

16. Empirical Study of Trust Relations Laboratory work - limited by time and by degree of risk involved Economic studies typically “ one-shot ” Exchange studies - ongoing relations, but short term, risk can be manipulated within a modest range Importance of field work and other studies

17. Empirical Study of Trust Networks Real world contexts where risk of default is high, background institutions weak or non- existent (that would sanction failures) Eastern Europe - trust networks for goods and services arose during communist era, Relatively high risk, “ black market ”, political insurgency - “ bonds of trust ”

18. Trust Networks cont. Trust networks tend to closure (under high risk and uncertainty) Betrayals run deep, cost is high In this context - existence of long-standing trust networks for exchange may subsequently have retarded the transition to a more open market economy Within group trust is high, out-group trust is low

19. Trust Networks as Social Capital? In Eastern Europe and Russia - trust networks provided within group social capital but served to constrain development of other networks that facilitated transactions with “ strangers ” - negative implications for economic development (contrast to Putnam ’ s claims of effects of social capital) Has implications for reputation systems which differ in closed and open systems (Yamagishi et.al. Forthcoming)

20. Trust Networks cont. Such networks facilitated other types of transactions: to obtain needed medical care, educational opportunities etc. (e.g. Hungary) Trust networks facilitated everyday modes of transaction Experimental evidence - commitment breeds trust under uncertainty(mutual risk taking)

21. Experimental Evidence Cook and Emerson (1978, 1984) re: commitment Kollock (1994) dyadic commitment and trust under uncertainty Lawler and Yoon (1998) commitment as result of positive exchange Molm et. al. (2000) trust derives from reciprocal exchange - proof of trustworthiness etc.

22. Other Evidence? Heimer (2001) - trust networks emerged under uncertainty and risk during period in which abortion was illegal in U.S. “ Jane ” organization - secret network of trusted women and physicians to protect those in need and provide services High risk network - much at stake Example of trust network as positive social capital (network provided access to services)

23. Other examples? Underground railroad networks for immigrants and refugees Networks of relatives and close friends that provide access to resources (jobs) in a new place (uncertainty and potential risk) If networks become closed - ethnic enclaves may lead to negative effects Restricts access to resources outside enclave (e.g. Nee and Sanders 2002)

24. Networks, Norms and Trust Networks - not norms and trust are the sources of social capital we use for various purposes Norms produce social control - mainly effective in close communities, monitoring and sanctioning are less problematic Trust leads us to take risks of cooperating with others to enter many social relations and in economic relations it fills in the “ gaps ” - incomplete contracts, non-binding agreements

25. Other topics Generalized trust (quite different from theories of relational trust) Power and trust - how is trust established in the context of power inequalities between the parties? (physician-patient, parent-child, employer- employee) How is trustworthiness assessed (social cognition, reputation and social structure) See Cook, Hardin and Levi, Cooperation without Trust? (forthcoming, 2005) -RSF

26. Conclusion Uncertainty and risk of loss leads to commitment among exchange partners and reliance on trustworthy partners This process creates trust networks - which can be mobilized for other purposes Such networks may become closed especially under high risk If so they may subsequently restrict or limit the scope of exchange and the move to open exchange systems

27. Conclusion cont. Only under certain conditions then do trust networks serve to provide social capital to members of the network Under other conditions - the networks may undermine processes of social change, lead to ossification of the networks and some degree of limitation in the social capital such relations typically provide A new research agenda