Trust, cooperation, and market formation in the U.S. and Japan

Abstract

Compared with the U.S., Japan is believed to have a collectivist culture that nurtures high trust. Results from laboratory and survey research, however, show that Americans are more likely to trust strangers than are Japanese. Why would trust be lower in a collectivist culture? We use an agent-based computational model to explore the evolutionary origin of this puzzling empirical finding. Computer simulations suggest that higher social mobility in the U.S. may be the explanation. With low mobility, agents rarely encounter strangers and thus remain highly parochial, trusting only their neighbors and avoiding open-market transactions with outsiders. With moderate mobility, agents learn to read telltale signs of character so that they can take advantage of better opportunities outside the neighborhood. However, if mobility is too great, there is too little trustworthiness to make the effort to discriminate worthwhile. This finding suggests that higher mobility in the U.S. may explain why Americans are more trusting than Japanese, but if mobility becomes too high, the self-reinforcing high-trust equilibrium could collapse.