Economics of Trust
“Her research has demonstrated that even in capitalist societies, if simple rules are applied, a self-organized commons can work. Individuals will cooperate to act in the common good (Botsman and Rogers, 2010 p. xxii.)” This passage refers to research conducted by Elinor Ostrom, a Nobel Prize winner in Economic Sciences. Ostrom found that, “Economics is not really fundamentally about markets, but about resource allocation and distribution problems (Botsman and Rogers, 2010, p. xxi). ” Botsman and Rogers (2010) refer to Ostrom’s research in the introduction of their book, What’s Mine Is Yours. Botsman and Rogers (2010) use the results of Ostrom’s research to lay the foundation for understanding collaborative consumption. According to Botsman and Rogers (2010) collaborative consumption is the idea that the twenty-first century will be defined by the creation of communities through sharing and access. Unlike the twentieth century that is believed to be defined by hyper-consumption.
But will collaborative consumption really define the twenty-first century. Fisher (2008) wrote a book titled, Rock, Paper, Scissors. Fisher’s (2008) book looked to understand the foundations of, “Game Theory in Everyday Life.” Fisher explores Game Theory through many examples, including the famous Prisoner’s Dilemma and why society falls victim to these games or social dilemmas. He then goes onto look at possible ways of fixing the system, which would result in what Botsman and Rogers see as a collaborative society.
The issue is that of trust. For a society to collaborate we must trust one and other. Botsman and Rogers (2010 p. xiv) view, “Technology (as) reinventing old forms of trust.” Has not technology also damaged our trust in one and other? Other than the fact that our information as well as our identity can be sold, what other violations of trust has been created due to technology? We are now able to use technology to find out if someone has lied to us through Internet searches. The Internet through websites such as Wikipedia can also lie to us because ultimately technology is a product of humans. The question then is who or what do we trust? It seems that technology has not simplified trust but rather expanded the possibilities of lies and false truths.
Fisher (2008) looks to understand the challenges of cooperation that we face and strategies that can be used to solve them. In his research he has come up with three different strategies. The first strategy is, Changing our Attitudes, Fisher (2008) believes that if we change our attitudes to believe that cheating is immoral, we would solve our social dilemma of cheating and mistrust. However he later explains that this strategy is only possible if every person changes their behaviors and believes in cooperation, which is unlikely.
Fisher’s second strategy believes in a Benevolent Authority to enforce cooperation. This was a strategy adopted by Plato, that the wise philosophers would be the advisors to kings, ensuring cooperation and fair play. But in this strategy we find that those on top will not be playing by the same rules as those below them. It is this hierarchical structure that diminishes the idea of fair play. Fisher (2008) refers to the story of King Solomon. Fisher (2008, p. 26) writes, “Wise he might have been (King Solomon), and benevolent, but he could also afford to be benevolent because he had annexed most of his countries wealth for himself.” In the case of King Solomon we find that ultimately he did not distance himself from competition, but rather he oversaw competition. It was in his control of competition that he cheated and unequally distributed resources to himself.
It seems that the first two strategies provided by Fisher, although theoretically plausible solutions, are impractical because of the nature of competition. His third strategy was Self-Enforcing Strategies. The assumption here is that as a society people could create strategies so that there is no incentive to cheat. This is most likely the most realistic strategy provided by Fisher. Here we find that this strategy works In any case provide that it falls within the Nash Equilibrium. Self-Enforcing Strategy builds a foundation of trust as long as each party can be compensated fairly. The exception to this strategy is that if there is a situation were there is a temptation for one party to cheat, then cooperative agreement is broken.
Botsman and Rogers (2010) seem to address these same underlying fears about actually being a collaborative society. The fears of the commons, also known as tragedy of the commons, where everyone is allocated a percentage of the commons, but a few individual feel that if they take a little more no one will notice. It is true that if only a few take a little extra it may be harmless, but what if everyone takes a little extra.
Botsman and Rogers (2010) believe that the rise of collaborative consumption is not a byproduct of the 2008 global financial crisis. Rather it is a groundswell movement to collaborate and change the way we consume. Even though, it seems that all of the example they list are profitable businesses. In one passage Botsman and Rogers (2010) write, “As the Economist noted, individuals in Collaborative Consumption are becoming “microentrepreneurs.” This passage illustrates that collaborative consumption has its roots in economics. Although many of the business stories seem altruistic, in fact they are still looking to make a profit, as opposed to being a non-profit. For the consumers the story is they are looking for a better value. This value could be a result of the economic times. Although Botsman and Rogers feel that people are becoming more thrifty, it could also be that they place values elsewhere.
The foundations of collaborative consumption will be a result of economics and trust. At what point is a value worth the risk of trusting a stranger. Is this point, the point of collaborative consumption?
Reference:
Botsman, R & Rogers, R. (2010) What’s Mine Is Yours. New York, NY: HarperCollins.
Fischer, L. (2008) Rock, Paper, Scissors. New York, NY: Basic Books.
