Trust: Reality or illusion? A critical examination of Williamson

Abstract

For Oliver Williamson, the concept of trust is useless (Williamson, O. E. [1993]. Calculativeness, trust, and economic organization. The Journal of Law and Economics, 36, 453–486). Whenever a calculative approach is possible, and he believes it is for economic and social exchange in general with the exception of relations between family, friends and lovers, cooperation becomes self-sustaining because it is founded exclusively on the convergence of interests. My critical examination bears on the generality and the realism of the conditions underlying this postulate, namely the presence of a common calculative space and the existence of a shared observational world. It tends to show in particular that Williamson confuses calculation and judgement and, as a result, he fails to disqualify the use of the notion of trust for either social exchange or market relations.

Keywords:

• trust
• calculation
• judgement
• social knowledge
• Oliver E. Williamson

Acknowledgements

The present article was part of a study on trust funded by the Commissariat Général du Plan. I would like to thank Michel Callon (École des Mines), François Eymard-Duvernay (Université Paris X) and Claude Ménard (Université Paris I) for their reactions communicated in personal conversations; I also thank those who took part in the symposium organised by the Centre de Sociologie de l'Innovation (École des Mines) and the seminars held at CERNA (École des Mines) and ATOM (Paris I), where I was able to present an early version of this text. Of course, I remain responsible for the ideas presented.

Notes on contributor

Lucien Karpik is a sociologist working in Economic Sociology and Political Sociology. In Economic Sociology, he has written numerous papers. His most recent book is L'économie des singularités (Bibliothèque des Sciences Humaines, Gallimard, 2007) (English translation: Valuing the Unique: The Economics of Singularities, Princeton University Press, 2010; German translation: Mehr Wert. Die Ökonomie des Einzigartigen, Frankfurt am Main: Campus, 2011). In Political Sociology, he has edited (with T. C. Halliday and M. M. Feeley), Fighting for Political Freedom. Comparative Studies of the Legal Complex and Political Liberalism (Hart Publishing, 2007) and Fates of Political Liberalism in the British Post-Colony (Cambridge University Press, 2012).

Notes

1. For another critical discussion, see Orléan (1994). The author adopts a different strategy in so far as Williamson's position is used to situate a personal approach, which starts from the position that trust cannot be reduced to calculation of personal interests.

2. ‘The relentless application of calculative economic reasoning is the principal device that I employ to define and delimit the elusive notion of trust’, or further on, ‘If calculative relations are best described in calculative terms, then diffuse terms, of which trust is one, that have mixed meanings should be avoided when possible’ (Williamson, 1993, p. 453, 469).

3. ‘Trust is a type of expectation that alleviates the fear that one's exchange partner will act opportunistically’ (Bradach & Eccles, 1989, p. 104).

4. For the first term: ‘In economic terms … the action would not be taken in the absence of trust because the expected net benefit is lower than if some alternative is chosen. … there is no best strategy independent of trust’. For the second term: ‘the transaction cost literature can tell us something about the role of trust in the economy’, or again, ‘the problem of trust in economic exchange is raised by the potential for opportunism inherent in investment in specific assets’ (Lorenz, 1988, p. 197, 198, 201).

5. ‘Calculativeness is the general condition that I associate with the economic approach and with the progressive extension of economics into the related social sciences’ (Williamson, 1993, pp. 456–457).

6. ‘I argue that it is redundant at best and can be misleading to use the term “trust” to describe commercial exchange for which cost-effective safeguards have been devised in support of more efficient exchange. Calculative trust is a contradiction in terms'; and even more clearly, ‘I maintain that trust is irrelevant to commercial exchange and that reference to trust in this connection promotes confusion’ (Williamson, 1993, p. 463, 469).

7. ‘Were my arguments to prevail, the word “trust” would hereafter be used much more cautiously – at least among social scientists, if not more generally’ (Williamson, 1993, p. 469; my emphasis).

8. ‘If almost-automatic and unpriced assistance is the most efficient response, provided that the practice in question is supported by sanctions and ultimately made contingent on reciprocity, then calculativeness obtains and appeal to trust adds nothing’ (Williamson, 1993, p. 471).

9. This is the classical perspective defended by a critic who rejects the exception of close personal relations formulated by Williamson: ‘Individuals may believe that they and others are acting for noncalculative reasons, but if their actions always turn out to be those that a calculative person would take, then the calculative theory provides a more parsimonious account of their behavior, and the individuals' internal mental states can be disregarded’. Therefore, ‘[t]he intuition … that the actors involved in a close relationship should not view their own behavior in calculative terms. But that intuition does not show that there would be anything wrong with an outside analyst modeling those actors' behavior ‘as if’ they had calculated each move’ (Craswell, 1993, p. 494, 499).

10. This is a way of relaxing the hypothesis of perfect rationality; see Menard (1994).

11. Williamson develops a third thread that we must at least point out, even if it seems secondary to the two others. Here is the key passage: ‘Institutional trust refers to the social and organisational context within which contracts are embedded. In the degree to which the relevant institutional features are exogenous, institutional trust has the appearance of being non calculative. In fact, however, transactions are always organised (governed) with reference to the institutional context (environment) of which they are a part. Calculativeness thus always reappears’ (Williamson, 1993, p. 486). The notion of trust, which has been ejected from economic and social exchange, reappears here to qualify those mechanisms safeguarding contracts. But this thesis runs into three difficulties it seems to me: (1) Why should the relation between institution and transaction be defined as ‘exogenous’? Institutions are not only external to persons, they are also within them, and their efficacy depends on this double presence. (2) Why should institutions be exempt on principle (like relations between close friends and family) from the kind of calculativeness supposed to govern other forms of exchange (not only economic but social)? (3) How can one substantiate (in Williamson's perspective) that trust can qualify a reality that is supposed at the same time to lie outside the sphere of calculation but which in reality is included in it if only – if I understand correctly – by the effects it produces? It must be said that the topic of ‘institutional trust’, which is given only a minor place in the text, is also its most obscure aspect.