The importance of being trusted

Boston University Law Review

Volumn 81, Issue 3, 2001, Pages 591-616

  Mitchell, Lawrence E ^a  

^a NONE

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EID: 0035646038     PISSN: 00068047     EISSN: None     Source Type: Journal    
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References (119)

1. See generally JOHN STEINBECK, TORTILLA FLAT (1935).
2. Our neighbors told us that their contractor was very expensive, so we had no intention of hiring him.
3. My colleague Bill Bratton tells me that my subconscious suspicion undoubtedly awoke me and that I really did not trust my son. Though I have no intention of exploring my subconscious here, suffice it to say that perhaps I did not. The important point for this article is that I told him that I did.
4. See generally Oliver Williamson, Calculativeness, Trust and Economic Organization, 36 J.L. & Econ. 453 (1993); see infra Part I.
5. See KEN BINMORE, GAME THEORY AND THE SOCIAL CONTRACT: PLAYING FAIR (1994).
6. See Fernando Flores and Robert Solomon, Creating Trust, 8 Bus. ETHICS Q. 205, 215 (1998) (commenting on Russell Hardin, Trustworthiness, 107 ETHICS 26 (1996) and describing commitment devices that make it in the individual's best interest to be trustworthy); see also Russell Hardin, The Street-Level Epistemology of Trust, 21 POL. & SOC'Y 505 (1993) [hereinafter Hardin, Street-Level Epistemology]. Flores and Solomon are a little unfair to Hardin. Although he focuses on calculation and cognition based on experience and the existence of favorable social conditions including commitment devices, he recognizes possible variations in peoples' capacities for trust as well as a possible benefit from being highly trusting. They are generally right in their critique, however, or Hardin focuses principally on the rationality of trust, even as he develops its epistemology. See generally Hardin, Street-Level Epistemology, supra.
7. See Fernando Flores and Robert Solomon, Creating Trust, 8 Bus. ETHICS Q. 205, 215 (1998) (commenting on Russell Hardin, Trustworthiness, 107 ETHICS 26 (1996) and describing commitment devices that make it in the individual's best interest to be trustworthy); see also Russell Hardin, The Street-Level Epistemology of Trust, 21 POL. & SOC'Y 505 (1993) [hereinafter Hardin, Street-Level Epistemology]. Flores and Solomon are a little unfair to Hardin. Although he focuses on calculation and cognition based on experience and the existence of favorable social conditions including commitment devices, he recognizes possible variations in peoples' capacities for trust as well as a possible benefit from being highly trusting. They are generally right in their critique, however, or Hardin focuses principally on the rationality of trust, even as he develops its epistemology. See generally Hardin, Street-Level Epistemology, supra.
8. See Fernando Flores and Robert Solomon, Creating Trust, 8 Bus. ETHICS Q. 205, 215 (1998) (commenting on Russell Hardin, Trustworthiness, 107 ETHICS 26 (1996) and describing commitment devices that make it in the individual's best interest to be trustworthy); see also Russell Hardin, The Street-Level Epistemology of Trust, 21 POL. & SOC'Y 505 (1993) [hereinafter Hardin, Street-Level Epistemology]. Flores and Solomon are a little unfair to Hardin. Although he focuses on calculation and cognition based on experience and the existence of favorable social conditions including commitment devices, he recognizes possible variations in peoples' capacities for trust as well as a possible benefit from being highly trusting. They are generally right in their critique, however, or Hardin focuses principally on the rationality of trust, even as he develops its epistemology. See generally Hardin, Street-Level Epistemology, supra.
9. See Fernando Flores and Robert Solomon, Creating Trust, 8 Bus. ETHICS Q. 205, 215 (1998) (commenting on Russell Hardin, Trustworthiness, 107 ETHICS 26 (1996) and describing commitment devices that make it in the individual's best interest to be trustworthy); see also Russell Hardin, The Street-Level Epistemology of Trust, 21 POL. & SOC'Y 505 (1993) [hereinafter Hardin, Street-Level Epistemology]. Flores and Solomon are a little unfair to Hardin. Although he focuses on calculation and cognition based on experience and the existence of favorable social conditions including commitment devices, he recognizes possible variations in peoples' capacities for trust as well as a possible benefit from being highly trusting. They are generally right in their critique, however, or Hardin focuses principally on the rationality of trust, even as he develops its epistemology. See generally Hardin, Street-Level Epistemology, supra.
10. See Fernando Flores and Robert Solomon, Creating Trust, 8 Bus. ETHICS Q. 205, 215 (1998) (commenting on Russell Hardin, Trustworthiness, 107 ETHICS 26 (1996) and describing commitment devices that make it in the individual's best interest to be trustworthy); see also Russell Hardin, The Street-Level Epistemology of Trust, 21 POL. & SOC'Y 505 (1993) [hereinafter Hardin, Street-Level Epistemology]. Flores and Solomon are a little unfair to Hardin. Although he focuses on calculation and cognition based on experience and the existence of favorable social conditions including commitment devices, he recognizes possible variations in peoples' capacities for trust as well as a possible benefit from being highly trusting. They are generally right in their critique, however, or Hardin focuses principally on the rationality of trust, even as he develops its epistemology. See generally Hardin, Street-Level Epistemology, supra.
11. See infra Part I.
12. See generally FRANCIS FUKUYAMA, TRUST: THE SOCIAL VIRTUES AND THE CREATION OF PROSPERITY (1996) (outlining his entire theory on trust).
13. See e g Lawrence E. Mitchell, Understanding Norms, 49 U. TORONTO LAW JOURNAL 177, 194 (1999) (describing how neoclassical theories were designed to address the possibility of cooperation in a world of self-interested actors).
14. See generally ADAM SMITH, THE THEORY OF MORAL SENTIMENTS (1982).
15. See generally ROBERT FRANK, PASSIONS WITHIN REASON (1989); Robert Frank, If Homo Economicus Could Choose His Own Utility Functions, Would He Want One With a Conscience? 77 AM. ECON. REV. 593 (1987) (discussing an example where seemingly irrational behavior can be explained within a utility-maximization framework); Robert Frank, A Theory of Moral Sentiments, in BEYOND SELF-INTEREST (1990).
16. See generally ROBERT FRANK, PASSIONS WITHIN REASON (1989); Robert Frank, If Homo Economicus Could Choose His Own Utility Functions, Would He Want One With a Conscience? 77 AM. ECON. REV. 593 (1987) (discussing an example where seemingly irrational behavior can be explained within a utility-maximization framework); Robert Frank, A Theory of Moral Sentiments, in BEYOND SELF-INTEREST (1990).
17. See generally ROBERT FRANK, PASSIONS WITHIN REASON (1989); Robert Frank, If Homo Economicus Could Choose His Own Utility Functions, Would He Want One With a Conscience? 77 AM. ECON. REV. 593 (1987) (discussing an example where seemingly irrational behavior can be explained within a utility-maximization framework); Robert Frank, A Theory of Moral Sentiments, in BEYOND SELF-INTEREST (1990).
18. See generally Lawrence E. Mitchell, The Death of Fiduciary Duty in Close Corporations, 138 U. Pa. L. Rev. 1675 (1990).
19. See generally Lawrence E. Mitchell, Trust. Contract. Process, in PROGRESSIVE CORPORATE LAW 185 (1995) (proposing that trust diminishes when the law values autonomy over community); Lawrence E. Mitchell, Fairness and Trust in Corporate Law, 43 DUKE L.J. 425 (1993) (asserting that the judiciary has failed to recognize the potential for fiduciary duties to establish the basis for trust in corporate relationships; Lawrence E. Mitchell, Trust and the Overlapping Consensus, 94 COLUM. L. REV. 1918 (1994) (considering trust and its relationship to the principles of justice that form the core doctrines of the political conception of society); LAWRENCE E. MITCHELL, STACKED DECK: A STORY OF SELFISHNESS IN AMERICA 194 (1998) (defending more activist legal and social regimes in response to a surplus of selfishness in our society, and arguing that we are all ultimately responsible for each other);
20. See generally Lawrence E. Mitchell, Trust. Contract. Process, in PROGRESSIVE CORPORATE LAW 185 (1995) (proposing that trust diminishes when the law values autonomy over community); Lawrence E. Mitchell, Fairness and Trust in Corporate Law, 43 DUKE L.J. 425 (1993) (asserting that the judiciary has failed to recognize the potential for fiduciary duties to establish the basis for trust in corporate relationships; Lawrence E. Mitchell, Trust and the Overlapping Consensus, 94 COLUM. L. REV. 1918 (1994) (considering trust and its relationship to the principles of justice that form the core doctrines of the political conception of society); LAWRENCE E. MITCHELL, STACKED DECK: A STORY OF SELFISHNESS IN AMERICA 194 (1998) (defending more activist legal and social regimes in response to a surplus of selfishness in our society, and arguing that we are all ultimately responsible for each other);
21. See generally Lawrence E. Mitchell, Trust. Contract. Process, in PROGRESSIVE CORPORATE LAW 185 (1995) (proposing that trust diminishes when the law values autonomy over community); Lawrence E. Mitchell, Fairness and Trust in Corporate Law, 43 DUKE L.J. 425 (1993) (asserting that the judiciary has failed to recognize the potential for fiduciary duties to establish the basis for trust in corporate relationships; Lawrence E. Mitchell, Trust and the Overlapping Consensus, 94 COLUM. L. REV. 1918 (1994) (considering trust and its relationship to the principles of justice that form the core doctrines of the political conception of society); LAWRENCE E. MITCHELL, STACKED DECK: A STORY OF SELFISHNESS IN AMERICA 194 (1998) (defending more activist legal and social regimes in response to a surplus of selfishness in our society, and arguing that we are all ultimately responsible for each other);
22. See generally Lawrence E. Mitchell, Trust. Contract. Process, in PROGRESSIVE CORPORATE LAW 185 (1995) (proposing that trust diminishes when the law values autonomy over community); Lawrence E. Mitchell, Fairness and Trust in Corporate Law, 43 DUKE L.J. 425 (1993) (asserting that the judiciary has failed to recognize the potential for fiduciary duties to establish the basis for trust in corporate relationships; Lawrence E. Mitchell, Trust and the Overlapping Consensus, 94 COLUM. L. REV. 1918 (1994) (considering trust and its relationship to the principles of justice that form the core doctrines of the political conception of society); LAWRENCE E. MITCHELL, STACKED DECK: A STORY OF SELFISHNESS IN AMERICA 194 (1998) (defending more activist legal and social regimes in response to a surplus of selfishness in our society, and arguing that we are all ultimately responsible for each other);
23. Mitchell, Understanding Norms, supra note 9;
24. Lawrence E. Mitcheil, Trust and Team Production in Corporate Law, 24 J. CORP. L. 869 (1999);
25. LAWRENCE E. MITCHELL, CORPORATE IRRESPONSIBILITY (forthcoming 2002) (manuscript at ch. 6, on file with author).
26. Annette Baier, Trust and Antitrust, 96 ETHICS 231 (1986); Annette Baier, Trust and Its Vulnerabilities, in 13 Tanner Lectures on Human Values 109 (Grethe B. Peterson ed., 1992) (considering why we trust others, and suggesting that the appropriateness of trust should be evaluated case by case).
27. Annette Baier, Trust and Antitrust, 96 ETHICS 231 (1986); Annette Baier, Trust and Its Vulnerabilities, in 13 Tanner Lectures on Human Values 109 (Grethe B. Peterson ed., 1992) (considering why we trust others, and suggesting that the appropriateness of trust should be evaluated case by case).
28. See generally Fukuyama, supra note 8.
29. See the citations to Tyler's large body of work in Mitchell, Trust and Team Production in Corporate Law, supra note 13.
30. While defining trust seems to be a convention in most writings on the subject, I will not do so here and refer the reader to the definition found in Mitchell, Trust. Contract. Process., supra note 13, at 193.
31. Hardin has addressed this as well. See generally Hardin, Trustworthiness, supra note
32. See generally NIKLAS LUHMANN, TRUST AND POWER (1979).
33. See id.
34. While Hardin, among others (including myself, see Mitchell, Trust. Contract. Process, supra note 13, at 200), has pointed out a distinction between institutional and individual trust, see Hardin, Street-Level Epistemology, supra note 6, I do not believe that the distinction is terribly important for the point I am making in this article.
35. While Hardin, among others (including myself, see Mitchell, Trust. Contract. Process, supra note 13, at 200), has pointed out a distinction between institutional and individual trust, see Hardin, Street-Level Epistemology, supra note 6, I do not believe that the distinction is terribly important for the point I am making in this article.
36. Flores and Solomon, supra note 6, at 215;
37. Mitchell, Trust. Contract. Process, supra note 13, at 199.
38. Hardin, Trustworthiness, supra note 6, at 29.
39. I do not mean to suggest that the experience of being trusted necessarily makes a person trustworthy in all times and in all places. The citizens of Monterey generally would have been foolish to trust the paesanos. In this respect, I think Hardin's insights into the epistemological development of trusting have great force and some transitivity into trustworthiness - it is a matter of experience and training. If the paesanos were trusted around Monterey, perhaps they might have developed more trustworthiness in general rather than only in the specific story we are told. I have elsewhere made the argument that the American model of corporate law, which distrusts of corporate directors and officers, is one of the contributing causes to corporate irresponsibility. See Mitchell, Trust and Team Production, supra note 13. Being trusted makes you more trustworthy only if it is something you regularly experience.
40. Mitchell, Understanding Norms, supra note 9, at 245.
41. Hardin talks about the commitment to religion as a possible means of establishing a credible commitment to be trusted. See Hardin, Trustworthiness, supra note 6, at 31 (comparing the social devices of relationships with close associations and constructed organizations such as religion). Steinbeck's example does not prove this point. Steinbeck gives us no reason to believe that the five paesanos shared the Pirate's religious faith - their trust was not induced by the Pirate's intended use of his savings, but instead by the fact that he trusted them to honor that use.
42. I do not want to overstate my case. Being trusted does not, in all people and in all cases, make one more trustworthy. In fact, the paesanos' response to Big Joe Portagee's defection was continual monitoring, and indeed Steinbeck suggests that he would have taken the money again if he had the chance. But this is only to say that some people are more prone to virtue than others, not that all of us will attain the same level of virtue despite our influences and experiences-an observation as old as Aristotle.
43. Abuse of that power will, of course, soon make one less trustworthy.
44. See generally Luhmann, supra note 19. Naomi Cahn pointed out to me that we do have some choice in whom we trust, a point I have explored in Mitchell, Trust. Contract. Process, supra note 13. The point is beyond the scope of this Article, but it seems worth noting that there are some circumstances in which our choices are severely bounded or even non-existent - which I think is part of Luhmann's point on the need for trust as an organizing mechanism. 30 164 N.E. 545, 546 (N.Y. 1928).
45. See generally Luhmann, supra note 19. Naomi Cahn pointed out to me that we do have some choice in whom we trust, a point I have explored in Mitchell, Trust. Contract. Process, supra note 13. The point is beyond the scope of this Article, but it seems worth noting that there are some circumstances in which our choices are severely bounded or even non-existent - which I think is part of Luhmann's point on the need for trust as an organizing mechanism. 30 164 N.E. 545, 546 (N.Y. 1928).
46. See Williamson, supra note 4, at 454, 463 (discussing how economics is increasingly applied to the social sciences, and explaining why economic transactions are better understood in terms of calculative behavior than in terms of trust).
47. See id. at 454-57, 485 (discussing how calculative economic reasoning is increasingly applied to the social sciences, and concluding that trust is not at useful analytical tool in the field of economics).
48. See id. at 456. (responding to Ronald H. Coases's proposition that subject matter, rather than analytical technique, theory, or approach, is the decisive factor in facilitating the application of economics to other fields). This extension of calculativeness into the related social sciences has produced its own backlash. See, e.g., BEYOND SELF-INTEREST ix (Jane J. Mansbridge ed., 1990). Even economists are struggling away from the exclusivity of the calculativeness paradigm. See Mitchell, Understanding Norms, supra note 9.
49. See id. at 456. (responding to Ronald H. Coases's proposition that subject matter, rather than analytical technique, theory, or approach, is the decisive factor in facilitating the application of economics to other fields). This extension of calculativeness into the related social sciences has produced its own backlash. See, e.g., BEYOND SELF-INTEREST ix (Jane J. Mansbridge ed., 1990). Even economists are struggling away from the exclusivity of the calculativeness paradigm. See Mitchell, Understanding Norms, supra note 9.
50. See id. at 456. (responding to Ronald H. Coases's proposition that subject matter, rather than analytical technique, theory, or approach, is the decisive factor in facilitating the application of economics to other fields). This extension of calculativeness into the related social sciences has produced its own backlash. See, e.g., BEYOND SELF-INTEREST ix (Jane J. Mansbridge ed., 1990). Even economists are struggling away from the exclusivity of the calculativeness paradigm. See Mitchell, Understanding Norms, supra note 9.
51. Williamson, supra note 4, at 453.
52. See id. at 485 (author emphasizing in his conclusion that economic behavior is better explained by calculativeness than trust). It therefore seems mistaken, as so many of Williamson's adherents and critics have done, to take Williamson's study as a model of trust, a phenomenon which he really does not purport to explain. But see id. at 453 (author explicitly stating that his purpose is to explicate the notion of trust).
53. See id. at 469, 486 (concluding that the concept of trust applies to non-calculative personal relationships, not commercial interaction).
54. See id. at 485-86 (explaining how genuine trust is the near absence of calculation, whereas calculation is integral to business transactions).
55. See id. at 463 (discussing how the interchangeable use of the words trust and risk can be misleading, and explaining that it occurs because trust is perceived as a function of the profitability of risk taking).
56. Williamson's explanation of how contracts are used to allocate risk, thereby dispensing with the need for trust, is similar to Hardin's understanding of commitment devices. See Hardin, Trustworthiness, supra note 6, at 41-42 (describing a variety of devices an individual can use to make a commitment that makes it in his or her interest to be trustworthy). What Williamson describes as the management of risk is sometimes distinguished by trust theorists as confidence.
57. See Williamson, supra note 4, at 463 (concluding that the concept of trust applies to non-calculative personal relationships, not commercial interaction).
58. See id. at 469 (discussing transaction cost economics and illustrating why trust is not implicated when an agreement reflects the parties' potential risks).
59. See id. The importance of efficiency in economic transactions is obviously a background value to Williamson's discussion. See id. While I do not discount the importance of efficiency, and indeed will argue that trust itself is economically efficient, I want to isolate for the moment this value underlying Williamson's analysis from other analytical approaches to trust. Thus, I do not assume that efficiency is necessarily an underlying value of trust as habit or behavioral norm.
60. Id. at 469.
61. See id.
62. Id. (advocating a more cautious use of the word trust, and explaining how situations are often better explained in terms of efficiency and credibility).
63. See Hardin, supra note 4, at 27-28 (concluding that the credibility of an individual's commitment is a function of that individual's own interest in being trustworthy).
64. See id at 26, 35-36. The story of Alberich comes from Richard Wagner's The Ring of the Nibelung. Id. at 26. Alberich forswore love forever in return for enormous power. Id. Hardin explains that this was not a credible commitment because it is unlikely that a young man could in one moment be swept away by lust, an emotion over which he has little control and the next moment commit to never love again. Id. at 26, 30. The character of Ukifune comes from Lady Marasaki's Tale of Gengi. Id. at 35. It is the story of an 11th century Japanese woman who, rather than choose between two suitors, cut her hair and entered a nunnery. Id. at 35. Cutting her hair was a "virtually irrevocable commitment, and by doing so she constrained herself from ever returning. Id. at 36.
65. See id at 26, 35-36. The story of Alberich comes from Richard Wagner's The Ring of the Nibelung. Id. at 26. Alberich forswore love forever in return for enormous power. Id. Hardin explains that this was not a credible commitment because it is unlikely that a young man could in one moment be swept away by lust, an emotion over which he has little control and the next moment commit to never love again. Id. at 26, 30. The character of Ukifune comes from Lady Marasaki's Tale of Gengi. Id. at 35. It is the story of an 11th century Japanese woman who, rather than choose between two suitors, cut her hair and entered a nunnery. Id. at 35. Cutting her hair was a "virtually irrevocable commitment, and by doing so she constrained herself from ever returning. Id. at 36.
66. See id at 30 (discussing how it would be incorrect to suppose Alberich could simply will himself to abstain from love forever with no external controls acting on that choice, and explaining how Hobbes ridiculed the notion of the direct willing of trustworthiness). 49 See id at 35 (describing how even if the people around her were distressed by her choice to become a nun, nobody thought Ukifune had the option of returning to society). That Hardin unlike Williamson, believes in the existence of a broader concept of trust is clear although it ultimately seems to come to rest in at least some subconscious calculation. Hardin is, perhaps purposely, somewhat ambiguous about this. See Hardin, Street-Level Epistemologv, supra note 4.
67. See Hardin, Trustworthiness, supra note 4, at 35-36 (explaining that the exceptional strength of this commitment stems from the fact that Ukifune was not bound merely by her own determination, but was instead backed by the whole of society). 51 It is telling that Hardin quotes Jon Elster's book of the same name. See id. at 26 n.24 (citing JON ELSTER, ULYSSES AND THE SIRENS: STUDIES IN RATIONALITY AND IRRATIONALITY (Cambridge: Cambridge University Press, 1979)).
68. See Hardin, Trustworthiness, supra note 4, at 35-36 (explaining that the exceptional strength of this commitment stems from the fact that Ukifune was not bound merely by her own determination, but was instead backed by the whole of society). 51 It is telling that Hardin quotes Jon Elster's book of the same name. See id. at 26 n.24 (citing JON ELSTER, ULYSSES AND THE SIRENS: STUDIES IN RATIONALITY AND IRRATIONALITY (Cambridge: Cambridge University Press, 1979)).
69. Again Hardin is broader in his view than Williamson, theorizing that one could be optimistically trusting if one had significant positive experiences trusting others and, in particular, where favorable social conditions for trust exist and that net gains from being highly trusting are possible.
70. See Williamson, supra note 4, at 483 (finding that trust arises in the context of personal relations, not economic relations). 54 Id. at 483 (stating that trust "should be concentrated on those personal relations in which it really matters, which will be facilitated by the use of 'political, social, and economic institutions' to govern calculative relations.") As I will suggest, infra, Williamson fails in his task. Hardin, by contrast, does not appear to allow for trust even in the context of personal relationships. See Hardin, Trustworthiness, supra note 6.
71. See Williamson, supra note 4, at 483 (finding that trust arises in the context of personal relations, not economic relations). 54 Id. at 483 (stating that trust "should be concentrated on those personal relations in which it really matters, which will be facilitated by the use of 'political, social, and economic institutions' to govern calculative relations.") As I will suggest, infra, Williamson fails in his task. Hardin, by contrast, does not appear to allow for trust even in the context of personal relationships. See Hardin, Trustworthiness, supra note 6.
72. See Williamson, supra note 4, at 479-80.
73. Id. at 481.
74. I will later ask why maintaining the quality of a relationship is important in serving self-interest and whether Williamson's explanation of reduced transaction costs is adequate.
75. Flores and Solomon, supra note 6, actually claim that to name "trust" in some sense destroys it.
76. See Williamson, supra note 4, at 484.
77. A. ALTMAN AND J. LAWRENCE, All or Nothing at All, on FRANK SINATRA, THE REPRISE COLLECTION (1990).
78. See Williamson, supra note 4, at 479 (explaining how the decision to suppress calculativeness may itself by deemed calculative, thereby making it nearly impossible to ever achieve pure non-calculative trust).
79. See Williamson, supra note 4, at 485-86 (addressing extremely calculative economic relationships, institutional relationships in which informal organization and culture restrain opportunism in a less-obvious calculating way, and nearly noncalculative personal relationships).
80. Williamson's narrative of the Norwegian shipowner comes to mind. See Williamson, supra note 4, at 464 (citing JAMES COLEMAN, FOUNDATIONS OF SOCIAL THEORY (1990), and retelling Coleman's story of a Norwegian shipowner who requests an emergency loan over the telephone, which the bank grants based on the shipowner's verbal request). Hardin engages in a similar analysis when referring to a Dutch shipowner taking a spot loan from a Hambros bank. See Hardin, Trustworthiness, supra note 6, at 32 (citing JAMES COLEMAN, FOUNDATIONS OF SOCIAL THEORY (1990), and repeating Coleman's story of a shipowner in need of an emergency loan).
81. Williamson's narrative of the Norwegian shipowner comes to mind. See Williamson, supra note 4, at 464 (citing JAMES COLEMAN, FOUNDATIONS OF SOCIAL THEORY (1990), and retelling Coleman's story of a Norwegian shipowner who requests an emergency loan over the telephone, which the bank grants based on the shipowner's verbal request). Hardin engages in a similar analysis when referring to a Dutch shipowner taking a spot loan from a Hambros bank. See Hardin, Trustworthiness, supra note 6, at 32 (citing JAMES COLEMAN, FOUNDATIONS OF SOCIAL THEORY (1990), and repeating Coleman's story of a shipowner in need of an emergency loan).
82. Williamson's narrative of the Norwegian shipowner comes to mind. See Williamson, supra note 4, at 464 (citing JAMES COLEMAN, FOUNDATIONS OF SOCIAL THEORY (1990), and retelling Coleman's story of a Norwegian shipowner who requests an emergency loan over the telephone, which the bank grants based on the shipowner's verbal request). Hardin engages in a similar analysis when referring to a Dutch shipowner taking a spot loan from a Hambros bank. See Hardin, Trustworthiness, supra note 6, at 32 (citing JAMES COLEMAN, FOUNDATIONS OF SOCIAL THEORY (1990), and repeating Coleman's story of a shipowner in need of an emergency loan).
83. The significance of this observation is that humans in relationships of varying sorts generally communicate with one another, and communication has been empirically shown to have an impact on trusting behavior and trustworthiness. See Morton Deutsch, Trust and Suspicion, 2 J. CONFLICT RESOL. 265, 273 (1958) (describing experimental data indicating that free communication can facilitate trust); see also Robyn M. Dawes et al., Cooperation for the Benefits of Us - Not Me, or My Conscience, in BEYOND SELF-INTEREST 97, 108-09 (Jane J. Mansbridge ed., 1990) (discussing importance of communication and conversation in creating group identity leading to trust). It also suggests that human relationships, like Williamson's calculative relationships, exist on a spectrum but are nonetheless clearly human and not abstractions.
84. The significance of this observation is that humans in relationships of varying sorts generally communicate with one another, and communication has been empirically shown to have an impact on trusting behavior and trustworthiness. See Morton Deutsch, Trust and Suspicion, 2 J. CONFLICT RESOL. 265, 273 (1958) (describing experimental data indicating that free communication can facilitate trust); see also Robyn M. Dawes et al., Cooperation for the Benefits of Us - Not Me, or My Conscience, in BEYOND SELF-INTEREST 97, 108-09 (Jane J. Mansbridge ed., 1990) (discussing importance of communication and conversation in creating group identity leading to trust). It also suggests that human relationships, like Williamson's calculative relationships, exist on a spectrum but are nonetheless clearly human and not abstractions.
85. Excluding, of course, pathological relationships.
86. Marjorie Chan, Some Theoretical Propositions Pertaining to the Context of Trust, 5 INT'L J. ORGANIZATIONAL ANALYSIS 227 (1997) (reviewing the literature and quoting Daniel J. McAllister, Affect-and Cognition-Based Trust as Foundations for Interpersonal Cooperation in Organizations, 38 ACAD. OF MGMT. J. 24, 26 (1995)); see also Peter J. Burke & Jan E. Stets, Trust and Commitment Through Self-Verification, 62 Soc. PSYCHOL. Q. 347, 347 (1999) (distinguishing cognition from affect in the context of trust).
87. Marjorie Chan, Some Theoretical Propositions Pertaining to the Context of Trust, 5 INT'L J. ORGANIZATIONAL ANALYSIS 227 (1997) (reviewing the literature and quoting Daniel J. McAllister, Affect-and Cognition-Based Trust as Foundations for Interpersonal Cooperation in Organizations, 38 ACAD. OF MGMT. J. 24, 26 (1995)); see also Peter J. Burke & Jan E. Stets, Trust and Commitment Through Self-Verification, 62 Soc. PSYCHOL. Q. 347, 347 (1999) (distinguishing cognition from affect in the context of trust).
88. Marjorie Chan, Some Theoretical Propositions Pertaining to the Context of Trust, 5 INT'L J. ORGANIZATIONAL ANALYSIS 227 (1997) (reviewing the literature and quoting Daniel J. McAllister, Affect-and Cognition-Based Trust as Foundations for Interpersonal Cooperation in Organizations, 38 ACAD. OF MGMT. J. 24, 26 (1995)); see also Peter J. Burke & Jan E. Stets, Trust and Commitment Through Self-Verification, 62 Soc. PSYCHOL. Q. 347, 347 (1999) (distinguishing cognition from affect in the context of trust).
89. Although the trusted person is sometimes also a trusting person, as in the case of business partners, our focus here is on that person as trusted, not trusting.
90. See Avi Ben-Ner & Louis Putterman, Trusting and Trustworthiness, 81 B.U.L. REV. (forthcoming July 2001).
91. See MITCHELL, STACKED DECK, supra note 13, at 133-38 (discussing the moral theories of Hume and Smith, and explaining how it is the combination of sympathetic reactions and vulnerability that lead us to help others and, by extension, create a fairer society).
92. SMITH, supra note 10, at 1.1.1. Imagination is clearly lacking in the kind of economic and rational choice analysis we have been discussing. Compare MARTHA NUSSBAUM, POETIC JUSTICE: THE LITERARY IMAGINATION AND PUBLIC LIFE 13-52 (1995) (discussing the contrast between the use of imagination in moral understanding in literature to its essential absence in this type of rational choice analysis).
93. SMITH, supra note 10, at 1.1.1. Imagination is clearly lacking in the kind of economic and rational choice analysis we have been discussing. Compare MARTHA NUSSBAUM, POETIC JUSTICE: THE LITERARY IMAGINATION AND PUBLIC LIFE 13-52 (1995) (discussing the contrast between the use of imagination in moral understanding in literature to its essential absence in this type of rational choice analysis).
94. See MITCHELL, STACKED DECK, supra note 13, at 133 (describing Adam Smith as David Hume's protégé).
95. David Hume, 2 A TREATISE OF HUMAN NATURE Pt. I, § XI (Ernest C. Mossner ed., 1969).
96. SMITH, supra note 10.
97. JOHN M. KEYNES, A TRACT ON MONETARY REFORM 80 (1923) (discussing the flaws underlying Quantity Theory economics and explaining how although certain assumptions economists adopt may prove to be true in the long run, in the long run we are all dead, making the "in the long run" standard a misleading guide).
98. For a further explanation of the ways in which an appreciation of human vulnerability can explain obligation and lead to a more stable society, see MITCHELL, STACKED DECK, supra note 13, at 127. Mitchell explains that if a neighbor's house is struck by lightning and destroyed, people are likely to observe their vulnerable situation, recognize the existence of similar vulnerability, and offer them a place to stay. See id.
99. It is my view that this phenomenon is at the root of American social and economic injustice. See MITCHELL, STACKED DECK, supra note 13, at 134-37 (discussing Hume's and Smith's moral theories, and explaining how distance enables us to dehumanize others because we are less likely to sympathize with them and recognize their vulnerabilities).
100. SMITH, supra note 13, at I.i.4.
101. I take this phrase, irresistibly, from Cardozo's famous opinion in Meinhard v. Salmon, 164 N.E. 545, 546 (N. Y. 1928).
102. Robert Frank, A Theory of Moral Sentiments, in BEYOND SELF-INTEREST, 71, 92 (Jane J. Mansbridge ed., 1990).
103. SMITH, supra note 7, at 3.
104. Id. at 6.
105. See Mitchell, The Death of Fiduciary Duty in Close Corporations, supra note 12 (discussing the role of fiduciary rights and duties in the context of close corporations, and concluding that fiduciary duty "is a valuable principle and an important supplement to the remedial approaches provided by statute"). 83 This in itself is enormously complex. What brings praise and praiseworthiness from one group (e.g. teenagers) might bring condemnation from another (e.g. their teachers and parents). The complexity suggests the need for a useful theory of norms to incorporate within it some method of normative evaluation, or at least a useful way of ducking the issue, much as Rawls does with his concept of the overlapping consensus. See JOHN RAWLS, A THEORY OF JUSTICE 340 (rev. ed. 1999). For a critical appraisal of the success of this effort see Mitchell, 'Trust and the Overlapping Consensus,' supra note 13, at 1932-33 (questioning Rawls's argument that trust will bind overlapping consensus, and suggesting that toleration provides a better explanation for this phenomenon).
106. See Mitchell, The Death of Fiduciary Duty in Close Corporations, supra note 12 (discussing the role of fiduciary rights and duties in the context of close corporations, and concluding that fiduciary duty "is a valuable principle and an important supplement to the remedial approaches provided by statute"). 83 This in itself is enormously complex. What brings praise and praiseworthiness from one group (e.g. teenagers) might bring condemnation from another (e.g. their teachers and parents). The complexity suggests the need for a useful theory of norms to incorporate within it some method of normative evaluation, or at least a useful way of ducking the issue, much as Rawls does with his concept of the overlapping consensus. See JOHN RAWLS, A THEORY OF JUSTICE 340 (rev. ed. 1999). For a critical appraisal of the success of this effort see Mitchell, 'Trust and the Overlapping Consensus,' supra note 13, at 1932-33 (questioning Rawls's argument that trust will bind overlapping consensus, and suggesting that toleration provides a better explanation for this phenomenon).
107. See Mitchell, The Death of Fiduciary Duty in Close Corporations, supra note 12 (discussing the role of fiduciary rights and duties in the context of close corporations, and concluding that fiduciary duty "is a valuable principle and an important supplement to the remedial approaches provided by statute"). 83 This in itself is enormously complex. What brings praise and praiseworthiness from one group (e.g. teenagers) might bring condemnation from another (e.g. their teachers and parents). The complexity suggests the need for a useful theory of norms to incorporate within it some method of normative evaluation, or at least a useful way of ducking the issue, much as Rawls does with his concept of the overlapping consensus. See JOHN RAWLS, A THEORY OF JUSTICE 340 (rev. ed. 1999). For a critical appraisal of the success of this effort see Mitchell, 'Trust and the Overlapping Consensus,' supra note 13, at 1932-33 (questioning Rawls's argument that trust will bind overlapping consensus, and suggesting that toleration provides a better explanation for this phenomenon).
108. SMITH, supra note 10, at III.2.10.
109. FYODOR DOSTOYEVSKY, CRIME AND PUNISHMENT 433 (Constance Garnett trans.) (Raskolnikov, the main character of the book, is consumed by guilt after killing an old landlady, and eventually confesses to the crime to free himself from emotional torment).
110. Smith, supra note 10, at II1.2.10.
111. Actually, it is Aristotle talking about the role of law in inculcating virtue.
112. Smith, supra note 10, at III.2.10.
113. Id. at III.3.5.
114. Id.
115. Id. at III.3.6. Compare this to the definition of Kaldor-Hicks efficiency, adopted by many lawyer-economists as the definition of efficiency: one person is made better off than another but in an amount sufficient to compensate that other if the first person were to choose to do so. See MARK SEIDENFELD, MICROECONOMIC PREDICATES TO LAW AND ECONOMICS 54-55 (1996) (defining economic change as Kaldor-Hicks efficient when "the new outcome makes those who benefit sufficiently well of that they would still end up with an increase in utility even if they compensated the losers enough to make the losers indifferent").
116. SMITH, supra note 10, at III.3.26.
117. 164 N.E. 545, 548 (N.Y. 1928) (holding that Salmon's failure to warn Meinhard of the new lease, and his appropriation of the benefit for himself, amounted to a breach of Salmon's fiduciary duty as a managing coadventurer). The following is a brief summary of the facts of the case: Walter J. Salmon entered into a twenty-year lease for a piece of property known as the Hotel Bristol. See id. at 545. Salmon wanted to convert the existing hotel into shops and offices, a $200,000 undertaking. See id. at 546. Salmon approached Meinhard, who agreed to pay Salmon half of the funds needed to construct, manage, and operate the property. See id. In return, Salmon agreed to pay Meinhard a percentage of the yearly profits. See id. Shortly before the lease expired, Salmon secretly entered into a new lease for the property, and never revealed the fact to Meinhard. Id. Meinhard sued Salmon, claiming that the new lease agreement was a product of the joint venture they had previously entered. Id. See also Mitchell, The Death of Fiduciary Duty in Close Corporations, supra note 12, at 1692-99.
118. Meinhard, 164 N.E. at 546 (discussing how Meinhard and Salmon originally suffered a loss through their joint enterprise, but eventually rebounded and enjoyed large profits).
119. Id. at 548.