Ernst Fehr Trust

Ernst Fehr gave the EEA Presidential Lecture on the role of trust. He summarised the potential importance of trust in financial markets and international relations. He argued that trust involves risk attitudes but must be considered more than risk attitudes. One reason for this is that the biological foundations of how people make trust decisions have clear pathways beyond those seen in risky decisions. The role of oxytocin, in particular, was discussed as a biological foundation of trust. One key question raised in the talk was the extent to which trust could ever be causally related to outcomes in cross-country settings. Various instrumental variable approaches have been tried (e.g. using common religions as an instrument) but there is no widely accepted way of doing this.

Some illustrative papers are below and his IDEAS page is well worth looking at for those interested in areas such as trust and neuroeconomics.

http://ideas.repec.org/a/aea/aecrev/v95y2005i2p346-351.html

http://ideas.repec.org/p/iza/izadps/dp1641.html