Trust/trustworthiness

Often regarded as indispensible to human relationships and interactions, trust is an attitude that we have towards other individuals, groups, and/or institutions.  It involves a kind of expectation or reliance on others.

Part of what it is to trust another person, group, or institution is to accept the fact that trusting involves risk, or some level of vulnerability.  One’s trust, for example, may be betrayed if the person in whom one trusts proves to be unreliable.  To put it another way, one’s trust can be betrayed, or undermined, if the person in whom one trusts is untrustworthy.

Trustworthiness has long been considered a virtue, and one which is especially important to living in a community.  A community, after all, cannot function without personal, commercial, and professional relationships – all of which depend on trust.

This fact is especially pertinent to relationships, and interactions, in financial markets where, for example, prospective investors must trust that the price of a given security reflects its actual value, or that the information they obtain regarding a security comes from a trustworthy source.

Trust is also an important aspect of public, and investor, confidence.  Indeed, one practical reason why fraud, insider trading, and other illegal trading practices are illegal is that such practices undermine the public’s trust in the fairness and integrity of financial markets.

Clearly, then, trust and trustworthiness hold an important place in the world of finance.  In fact, some argue that in the world of business “trustworthiness finds its most distinctive place in modern life, especially in connection with the provision of financial services,” as Steven Baker writes in the International Encyclopedia of Ethics (p. 883, Fitzroy Dearborn Publishers, 1995).  He continues:

“Since the eighteenth century, the fiduciary trustworthiness of corporate entities has come to be even more important than that of individuals and families (some corporate entities even came to be called ‘trusts’).  Without fiduciary trust, the economic world as it is known could not exist” (Baker p883).

The German philosopher Immanuel Kant also linked trust in human relationships to respecting others, as well as ourselves.  On Kant’s view, trust is an expression of respect.  By trusting and being trusted by others, we thereby show mutual respect to one another.  This consequence of trust, in addition its cooperative benefits, made trust an important part of Kant’s ethical theory.