A Matter of Trust 0

Trust is much easier to undermine that it is to create, and, in general, we are much better off in a society where we are able to trust one another than in one in which we are not.

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An interview with Joseph Heath, Associate Professor, Department of Philosophy, University of Toronto by Xavier Landes

Among others, your fields of specialization are political philosophy, theory of action, critical and counter-cultural thought, and normative economics... It may seem surprising to see philosophers being concerned with economic topics such as market regulation and, even more surprising, that they may have something valuable to say. What are the specific insights of political philosophy on this? What distinguishes a philosopher from, for instance, an economist?

There are two ways in which philosophers have become fruitfully engaged, over the course of the past few decades, with issues that have traditionally preoccupied economists. First, contemporary microeconomics is based upon a particular conception of practical rationality, the famous homo economicus model of action. There are some fairly well-known difficulties with this model. The sort of training the economists received, however, is focused almost entirely upon applications of this model. They are not really taught to examine its presuppositions, or to consider alternatives. Philosophers, on the other hand, are for the most part specialists when it comes to dealing with the structure of rationality. Philosophers instantly recognize the homo economicus model as one of many candidate conceptions of practical rationality. So when it comes to revising this model, in response to its shortcomings, philosophers tend to be able to think about the question in a more disciplined fashion. Most of my academic work has been in this area – focusing on how to develop a broader conception of practical rationality, one that is able to accommodate both communication and rule-following.

The second major point of contact between philosophers and economists in recent decades has been over the issue of distributive justice. John Rawls’s A Theory of Justice undoubtedly represents a turning-point here. Prior to that, economists used to consider themselves experts in efficiency. They reconciled this to their commitment to positive social science by claiming that efficiency was a non-moral value, a purely technical criterion. Rawls established two things once and for all: first, that efficiency was a normative principle – one constituent of a broader theory of justice – and second, that the principle of equality could be modeled using some of the very same tools and techniques that economists had pioneered in their approach to the study of efficiency. Thus the taboo that prevented economists from discussing issues of distributive justice was lifted – and naturally, when they began to discuss this subject, they found a lot of the work done by philosophers and legal theorists to be of value.

In both cases, what philosophers bring to the table is the result of a long tradition of active inquiry on the subject of normative questions. These sorts of inquiries were severely marginalized in other disciplines for a very long time, on the grounds that they were “unscientific.”

It is difficult to not evoke the current financial crisis. What are the normative debates that have seemed to emerge or be accentuated?

The current financial crisis changes the rhetorical but not the scientific landscape. For the past 30 years, Keynesians have been on the defensive, with monetarists, libertarians and free-market ideologues on the offensive. That has been suddenly and dramatically reversed. But if anything, all it constitutes is a reaffirmation of first principles. Common sense (plus a little bit of Keynes) tells you that capitalism is going to have certain characteristic weaknesses, all of which we on full display throughout the 19th century. Free market ideologues spent decades denying this, claiming that markets were far more robust than they were typically given credit for. It turns out they were wrong. If you allow a parallel banking sector to develop, outside the scope of government regulation, it ends up behaving in very much the same way as 19th century banking behaved, prior to the development of regulation. This only came as a surprise to people who were in the grip of a theory, as we say. There are lots of important policy issues that are raised by the crisis, but I do not see any significant normative ones. It turns out that up is still up, and down is still down.

Could the growing involvement of numerous states in order to counteract crisis effects revert the recent tendency of the decline of state intervention into economy?

Yes, although a lot of the intervention undertaken in the name of stimulus is not going to be permanent. Still, we have a once-in-a-century opportunity to make a set of investments that will be enjoyed for generations to come. In both Canada and the United States it is striking how much of the most durable, and most beautiful, infrastructure was built during the Great Depression. The Hoover Dam is perhaps the most well-known example. Frankly, I am as surprised as anyone that fiscal instruments should have come back on the table as quickly as they did. Like many people, I thought that central banks would be able to pretty much keep things under control using strictly monetary instruments and that a liquidity trap was an unlikely scenario. But now here is the United States, with interest rates at 0%, looking a lot like Japan in the 1990s, turning to government spending as the only way of fighting a recession. This is an incredibly surprising development.

Speaking about state regulation, what should be the main functions of the state, especially on economic issues? The origin of the crisis seems to be the lack of regulation of competition. A “classical view” stipulates that the state should limit itself to fields where the market is less efficient or areas that experience ‘market failures’. Is it still a pertinent way to conceive regulation?

In Germany they say “markets whenever possible, the state whenever necessary.” This maybe overstates the level of appropriate reticence, but I think it isp useful as a cautionary maxim. It’s very easy to overestimate the organizational capacities of the state (or to underestimate its ability to pursue irrational policies). Many people were seduced far too easily by the view, for example, that public ownership of various enterprises would lead them to pursue the public interest, or the common good. It turns out to not quite so simple. So what you call the “classical view” still has a lot to be said for it. Nevertheless, it is important to recognize that the state is a unique institution, with a distinctive set of organizational resources that allow it to play a distinctive role in the economy. The comparative advantage of the state as an institution is, speaking roughly, that membership in it is universal and compulsory. This means that the state is often uniquely well-positioned when it comes to resolving free-rider problems. Voluntary or private solutions to free-rider problems are intrinsically limited, because of limitations on the power of private parties over those who choose not to participate. To what the state is doing, when it enforces property rights, or imposes environmental regulations, or creates a social safety net, is essentially resolving free rider problems. I do not think that any revision in this basic viewpoint is required. What has changed, however, in the past few decades, is our understanding of how broad the range of circumstances are in which private parties will be unable to resolve free-rider problems through contracting and market exchange. Better understanding of the economics of information, for instance, has created a better sense of how unlikely it is that private parties will be able to come to efficient insurance arrangements and so how significant the role of the state will be.

The crisis has accentuated a second major issue, distrust. In Europe, populations show high levels of distrust towards institutions. It raises the fundamental question of the role of trust in maintaining democratic institutions. What is the role of trust in public policies? And what are the normative challenges carried by it?

There are a couple of issues there. In sociological parlance, it is common to distinguish between social capital, which one might think of as the horizontal trust relationships that exists between private individuals, and legitimation, which is the deference that individuals show to institutions that have, in some sense, authority over them. The United States is an example of a society that has a lot of the former and very little of the latter. In other words, Americans are quite trusting of each other, compared to people in other countries, which is one of the reasons why it is relatively easy to start a business there and find investors. At the same time, they are extremely distrustful of government, to the point that it becomes a genuine handicap, and a limitation on the organizational capacity of that society. So trust is a complicated business.

With respect to democracy, I think it is very easy for people to overestimate how much democratic institutions are able to accomplish, in the way of social integration, and how much they simply presuppose. Generally speaking, I am inclined to think that political democracy solves only two or three problems, and so you need to have the overwhelming majority of your social problems solved before you can have a stable democracy. Certainly you need to have more than just a set of elections before a country can be declared democratic. You need to have a full cycle where the ruling party loses, there is a peaceful transition of power to the opposition, who also eventually loses, and hands power back again. This willingness to relinquish power is something that a democratic system as such is unable to motivate; it must come from the background culture.

In general, populations in New Europe are reported to display higher levels of distrust than in other European countries or in North America[1]. Taking into account the specific history of the region, do you think that issues and remedies are different than, for instance, in Canada?

It is well understood that decades of communist rule had a very corrosive effect on civil society throughout eastern Europe. It is a great historical irony that communism had a more atomizing effect upon society than capitalism ever did. Unfortunately, no one has the faintest idea how to regenerate this trust, once is it destroyed. I actually think Francis Fukuyama’s book Trust is very good on this score. One of his central claims is that, in countries where spontaneous social solidarity is difficult to achieve among strangers, there is greater reliance upon formal institutional actors, such as the state. One can see this in France, he argues.

Where the Canadian experience in these matters might prove useful is not in the area of social capital, but rather with respect to ethno-cultural divisions. Many eastern European countries face two challenges to social solidarity, the first an atomizing tendency, whereby individuals are unwilling to cooperate with other individuals, and the other sectarian, where group loyalties serve as an impediment to cooperation. Canadians know all lot about the latter, since Canada is a deeply divided country that faces recurrent crises of national unity. This is a somewhat depressing, given that Canada’s attempt to bridge this ethno-linguistic divide has occurred under what I think most people would agree is an “best-case scenario” – a very wealthy, developed nation, and a relatively equal distribution of that wealth, over one hundred years of peaceful, uninterrupted democratic rule, the near-total absence of political violence, and finally two background cultures, French and English, that are deeply liberal. And yet, we still cannot find a satisfactory constitutional accommodation for the two ethno-linguistic groups. I often think the best argument against Quebec’s secession from Canada would be just the terrible example it would set of the rest of the world. If we cannot get along, under something close to ideal conditions, what hope does anyone else in the world have? Might as well give up now, and break the world up into thousands of micro-states.

Very often, we tend to focus on trust, forgetting that it is just a part of the story. Social distrust is also said to be very important for a proper democratic functioning. It might be argued that democracy constitutes an array of specific mechanisms for generating positive outcomes from political conflicts. How does distrust fit into the big picture?

Back in the 70s, there was a spate of books published, all worried about the dramatic decline in trust toward various groups or institutions: doctors and hospitals, politicians, journalists, etc. People assumed that this was going to create some sort of functional problem for the society as a whole. Yet for the most part it has not. It is true that one of the most powerful arguments for democracy is based on distrust, the idea that political leaders cannot be trusted not to overstay their welcome. Voting is an extremely effective instrument for evicting people from higher office, and so democratic leaders tend to leave office well before their net contribution to society becomes negative. Beyond this, however, I am not sure. It is important to keep in mind that trust is much easier to undermine that it is to create, and that, in general, we are much better off in a society where we are able to trust one another than in one in which we are not.


[1] Gallup World Poll.

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