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Trust and the Internet

A major assumption of those interested in the digital divide is that economic development depends upon computer and Internet access. In a talk, economist Paul Zak provided one of the missing links between Internet usage and economic development: trust.
Views: 3.101 Created 10/01/2006
A major assumption of those interested in the digital divide is that economic development depends upon computer and Internet access. If this were not the case, the fact that there is a digital divide would be much less worrisome. That is, if economic development was not correlated with a community’s access to computers and the Internet, this access would not be seen as quite so crucial. In a talk on November 17th at the Harvard Law School, economist Paul Zak provided one of the missing links between Internet usage and economic development: trust.

“One of the major issues with developing international trade and economic development is interpersonal trust,” Zak said. If people in a society do not trust each other, they will not be willing to transact with one another. Hence, economic development will not occur. This means that the level of trust in a given society is correlated with the economic development of that country. And Zak’s study shows that trust is one of the best measures of development. Not surprisingly, the level of trust in a given society varies from country to country. For instance, 65 percent of people in Norway say others in their country are trustworthy (the highest percentage in the survey), whereas only 3% of people in Brazil say others are trustworthy. Zak maintained that the factors involved in determining trust include a country’s legal environment, social norms, diligence by those transacting, per capita income, income inequality, and social, ethnic, linguistic heterogeneity.

What Zak has found in terms of Internet usage is simply that Internet usage increases a certain type of trust that could lead to economic development. It turns out that there are at least three types of trust. In his paper, “Trust in Transition,” Martin Raiser examines these types. The first type is between kinship groups and families. Raiser writes that “these relationships dominate economic transactions in subsistence economies…” The second type trust is between individuals who have known each other for a long time but are not kin. Raiser writes that transactions “in this case are repeated and trust is ‘process-based.’ Most business networks are characterized by this type of repeated relationship and the prevalence of process-based trust.” Zak, in his presentation, grouped these first two types of trust under the name ‘internal trust.’ At this level, an individual in a cultural or ethnic group might only trust others in that same group. This type of trust might breed ethnic stereotypes, which are extremely difficult to overcome and are not helpful for economic development.

The third type of trust, however, is between individuals who enter into transactions with each other having only limited knowledge about each other. Raiser writes that for “economic exchange to take place between these types of individuals, generalized or ‘extended trust’ is needed. The importance of this third type of relationship and the correspondent economic transactions between largely anonymous individuals is a key element of a modern economic system.” Zak terms this third type of trust ‘generalized trust.’ It is this type of trust that is ultimately important for economic development. This is because in order for development to occur people must be willing to transact with others about whom they have limited information. Further, it is possible that use of the Internet transforms the second type of trust (trust internal to a group) into the third type of trust (generalized trust). This is extremely important because while generalized trust is great for economic development, internal trust is not.

Zak’s study examined the effects of NGO supplied Internet kiosks in 6 villages in Africa, Asia, and Latin America. If people living in those villages wanted to use the Internet they could and if they did not want to they did not have to. The study found that those who chose to use the Internet trusted others more, communicated more with others, felt safer in their communities, and were more likely to vote (these positive conclusions were all grouped together under the heading ‘social capital’). The following four factors increased social capital: (1) the longer individuals used the Internet, (2) the more frequently they used the Internet, (3) the more they used email, and (4) the more they used the Internet to find development information. The increase in social capital due to Internet usage indicates the third type of trust outlined above. These results were strongest in India, South Africa, Thailand, and Peru, and weaker in Uganda and Guatemala. The positive results of this study were preserved even after selection bias was controlled for. That is, the result didn’t just show that the people who trusted others more chose to use the Internet, but that if a person chose to use the Internet he was more likely to trust others, regardless of his level of trust before Internet use.

Zak’s studies show that the type of trust most necessary for economic development is fostered by Internet use. And through this type of trust Zak believes that “you might initiate a virtuous circle with the Internet; you could come to trust people in general and then trust them individually.” That is, if you sell a piece of furniture to a person who is not in your ethnic group you might then come to actually trust them. This, in turn, could lead to peace between ethnic groups. The implication of this is that trust can occur across countries given computer and Internet access. Zak went on to say that, “through the Internet, impersonal transactions can be transformed into personal transactions.” This means, in essence, that one of the reasons the digital divide is so important worldwide is that more Internet access in the developing world can aid in the development of generalized trust, which is necessary for a burgeoning economy and worldwide peace. While this is surely optimistic it definitely places the digital divide in a very different light.

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