1

TRUSTWORTHINESS AS A MORAL DETERMINANT OF ECONOMIC

ACTIVITY: LESSONS FROM THE CLASSICS

Abstract

The article examines the way that social norms and ethical values in general, and

trustworthiness in particular, affects the behavior of economic agents. Classical economists

believed that economic actions are context-dependent and thus constantly under the influence

of social norms and values. Through the presentation of the issue of trustworthiness in the

work of Adam Smith, Nassau William Senior and John Stuart Mill, it is suggested that

Classical Political Economists had establish trustworthiness as a general ethical precondition

for markets to work properly as well as an important asset of the national social capital.

Key words: social norms, trustworthiness, economic behaviour, Smith, Senior, J.S. Mill.

1. Introduction

Though the role of trustworthy behavior has been an incidental issue in Neoclassical

Economics (Akerlof 1970; Arrow 1974; Sen 1977; Williamson 1985; Tullock 1985), it is

only during the last decade or so, that mainstream economists have concentrated their

attention on the way that social norms and ethical values affect economic behavior of

entrepreneurs and consumers, contributing thus to a fast growing literature. Williamson

(1993) has studied the notion of trust as a means to reduce moral hazard and the cost of

transactions. Casson (1992, 1993) and Knack & Zak (2001) have maintained that the level of

trust and other moral commitments is fundamental to economic performance and sustainable

growth, while Pejovich (2003) held that the prevailing lack of trust in former socialist

countries is a major source of the transaction costs specific to the process of transition.

Additionally, Nooteboom (1996) and Hausman (2002) theoretically explore the benefits

derived from trustworthiness on the performance of firms. Many empirical studies are also

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carried out to explore the real impact of trustworthiness in business activities and labour

relations in many European countries and the US (cf. Levi 2000; Keefer & Knack 2005).

Beyond mainstream economics, political scientists such as Gambetta (1988) have linked trust

and government performance and proved that governmental honesty and efficiency greatly

affects the citizens’ trust. Finally, the role of trust in sustaining different ethnic trading

networks was the subject of recent research in Economic Anthropology (Landa 1994;

Ensminger 2000; Henrich et alii 2001).

Strikingly, nowhere is any classical economist ever mentioned. As shown below, the

idea of trustworthiness was however not strange to classical economists, who believed that

economic actions are context-dependent and thus constantly under the influence of social

norms and values that generate trust. Despite the self-image of Political Economy as an

objective discourse on society, moral considerations were present at the very heart of

classical economic theory because it was recognised as a matter of fact that morality plays a

role in economic activity. Through the presentation of the issue of trustworthiness in the work

of some leading Classical Political Economists, it will furthermore be suggested that the

presence of ethical norms is essential for capitalist markets to work properly.

In the next section, an effort will be made to disentangle the meanings of trust in the

recent literature. This is mainly done for the purpose of disclosing the Classical meaning of

trust. In section three, the positions of Adam Smith, Nassau William Senior and John Stuart

Mill will be discussed. In their work trustworthiness was connected to the principles of

morality and commitment to a certain moral imperative which shapes economic behavior. For

that reason, it was incorporated into the very heart of economic theory. Both from a

theoretical and from a methodological point of view this is very instructive for our actual

understanding of the economic system.

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2. Current meanings of trust

Trust and trustworthiness are elusive concepts that have many and often conflicting

meanings.1 Arrow (1974:23) used the concept of trust as equivalent to confidence of oneself

in other selves, using an interesting metaphor: “Trust is an important lubricant of a social

system. It is extremely efficient; it saves a lot of trouble to have a fair degree of reliance on

others people’s word”. He followed thus the spirit of Alfred Marshall (1982:19) when he

affirmed, “for even the most purely business relations of life assume honesty and good faith”.

In contrast, Akerlof (1970:490) has spoken of trust as a necessary “pre-condition for trade

and production” in the very specific case of the market for second-hand cars and ‘lemons’ in

general. This meaning is very closely related to the issue of honesty and to the subsequent

cost of dishonesty, which is nowadays a crucial topic in New-Institutionalist transaction cost

economics. Briefly stated, in the presence of trust as a self-enforcement mechanism, the cost

of making and respecting contracts is generally much lower (Furubotn and Richter 2005:244;

Levi 2000:151). Reciprocity –i.e. responding in a friendly way to a friendly action and

retaliating to a hostile one- is another essential aspect of this meaning (Fehr and Gächter

2000).

A second meaning of trustworthiness is attached to the idea of calculativeness.

People act with trustworthiness based on a rational assessment of the costs and benefits of

trusting. This is “trust as strategy” or “calculative trust” and according to Williamson

(1993:463), it may not be called trust at all. If it is in the interest of someone to trust other

people, because of the benefits related to (or the sanctions of not trusting), this is not trust but

the result of a conscious rational calculation. Understanding trust as a part of maximization

strategy, gave the opportunity to many game theorists to represent its presence or absence in

the form of the standard prisoner’s dilemma. Trust is then understood in the context of

1 Common dictionaries, like the Oxford, define trust as “firm belief in the reliability, honesty, veracity, justice,

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infinitely repetitive games as a problem of rational choice to cooperate or not with the other

part.2

A third meaning of trust implies unconditional cooperation. James (2002:291) gives

the following definition: “To say ‘A trusts B’ means that A expects B will not exploit a

vulnerability A has created for himself by taking the action”. It means that someone relies on

others not to take advantage of him, and of course that he/she does not take advantage of

others when trusted. As was said, unconditional “cooperation does not work without trust”

(Furubotn and Richter 2005:348). The difference with the previous meaning of trust and

cooperation is that it is not the result of rational deliberation or even coercion, but a moral

attitude towards someone else that can be built up and increase with its usage. As Nooteboom

(1996:992) wrote:

We trust someone if he is likely to cooperate, even if he is not coerced to do so and has no

direct material interest in doing so; Thus, trust is associated with the non-egotistic sources

of cooperation; with loyalty to a partner due to ethics or bonds of friendship or kinship

rather than coercion or material self interest.

Finally, there is a fourth meaning of trust as a result of moral commitment. Contrary

to the first two meanings, it requires no ex post incentive to be trustworthy, other than the

moral imperative to trust each other. James (2002) and Khalil (2003) have clarified that it is

one thing to trust knowing that it pays to be trustworthy (or perhaps it is prudent not to be

untrustworthy), and a different thing to trust irrespectively of the eventual benefits in sight,

and also independently of any bonds of friendship or kinship, believing that the other part

will not exploit the trust. As Sen (1977, 1987, 2005) has repeatedly shown, moral

“commitment does involve counter-preferential choice”, since moral acts ignore costs

strength etc., of a person or thing”. Trustworthiness is the moral value that generates trust. 2 See e.g. the essays of Tullock, Axelrod & Dion, Hirshleifer and others reprinted in Khalil (2003). For an

introduction see also Hollis (1994), chap.6. Rowthorn and Sethi (2008) examine the determinants of trust in a

population of principals and agents where the former follow boundedly rational procedures.

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(Etzioni 1986). Trustworthiness is a moral value “that we learn early in life and that is largely

resistant to bad experiences –or good ones” (Uslaner 2008:290). Because of its emotional

character, “trust goes beyond the direct control of reason” (Lahno 2001:185). Nevertheless,

as Hausman (2002:1769) aptly observes, “the fact that trustworthy actions are not motivated

by self interest does not imply that they do not serve self-interest”. They can also be

advantageous both to the welfare of the actor and the society in an unintended way.

In all that, trustworthiness always implies at least two persons, the trustor and the

trustee, who have something in common.3 It is therefore by definition an interpersonal matter,

even in the extreme case of cooperation as a repetitive game that is subjectively perceived.

There is of course also impersonal trust, between an individual and an institution. One may

thus trust the army or the police of his country, or the church and the political parties, or even

the banking system and the legal system. Nonetheless, this is the result of the quality and

efficiency of these institutions, which is more a political than a moral matter and for that

reason it rests out of the range of this work.

3. The issue of trustworthiness in Classical Political Economy

Having briefly examined four, out of many, different meanings of trustworthiness

connected to confidence, calculativeness, cooperation and commitment, our effort will be

now to endeavor to estimate its significance in Classical Political Economy. It will be shown

that it remains closer to the idea of moral commitment despite the changes in the economic

discourse from Smith to Mill. On the one hand, Smith wrote in an era when economic issues

were still a part of moral philosophy, and it was relevant to know how morality affects

economic exchange. Senior and Mill on the other hand, were responsible for the

Positive/Normative dichotomy in an effort to objectivate the discourse of the newly founded

3 This is why self-trust, i.e. a person’s faith in its own capabilities, is irrelevant here.

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science of Political Economy. Eager to break away from the poverty and social misery of the

early industrial era, Classical Economists had to underline that to seek for more material

wealth was not the same thing as to “justify the ways of Mammon to man”, to use Joan

Robinson’s inspired expression (1983:25). Yet, moral issues of economic transactions were

never left aside, as in the case of Ricardo. The latter had much less interest in moral questions

in his economic writings, although he did refer on more than one occasion to moral aspects to

develop his model, as in the case of the factors determining the minimum level of wages. His

celebrated ability to treat economic matters in abstracto, led him to overemphasize

deliberately a non-normative approach to the social activities of production and distribution

of wealth.

3.1 Smith

In his Theory of Moral Sentiments, Smith recognized that individuals are definitely self-

interested: “Every man is, no doubt, by nature first and principally recommended to his own

care; and he is fitter to care of himself than of every other person…” (1976a:82). Hitherto, he

insisted that “self-love” is not alone in directing human action. There are many psychological

motives that counteract the instinct of “self-love”, such as the “desire for social esteem”,

“vanity”, and the “desire for an easy life”, as well many selfish passions that strengthen it,

like greed, avarice, ambition and the love of power.4 Moreover, Smith’s genetic concept of

“sympathy” acts also as a natural counter motive to ‘self love’, since it represents one’s

interest in the happiness of other people. Individuals understand themselves as being always

part of a social community and act in consequence with “compassion for their fellow men”.

Smith’s well known figure, the “impartial spectator” is constantly present, “as a moral

hector”, looking over our shoulders to “scrutinize the propriety of our own conduct”

4 Cf. Song (1995), Winch (1996:103-8).

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(1976a:112).5 In view of the above, human behaviour and action are not to be considered as

the result of rationalistic calculations of personal advantages and disadvantages alone. When

someone exchanges goods, he/she is trying to get the best advantage of it without losing

his/her predisposition to mutual sympathy, the human faculty which is fundamental to social

cohesion. To obtain what we want “mere self-love is not sufficient” because we have to

consider unselfishly what the other party wants too (Kennedy 2005:103). In a 1764 lecture

Smith made clear the insufficiency of self-love to conclude a commercial deal:

Man …works on the self-love of his fellows, by setting them a sufficient temptation to get

what he wants; the language of this disposition is, give me what I want, and you shall have

what you want (Smith quoted in Kennedy 2005:105).

This behavioural pattern of mutual sympathy occurs in a specific social context as a

result of the socialization process. Smith explained repeatedly and extensively in the Wealth

of Nations how informal institutions, such as rules, norms and habits shape individual plans

and behaviour.6 Most of the commercial transactions described in the book involve people

who know each other belonging to a small community of exchangers, thus making the

importance of informal institutions greater. We would say in modern terms that exchangers

act “as having some idea about each other’s preference patterns” (Fontaine 1997:270).

The notion of trustworthiness reappears a dozen times in his book. Smith spoke for

the first time about “the trust which is reposed in [the principal clerk]” as an essential quality

of “the labour of inspection” that should be taken into account when it comes to estimate his

remuneration (1976b vol. I: 55). Smith even believed that trust was at the origin of one out of

five significant exceptions to his general rule of equality of wages between different

employments (1976b vol. I: 117). Using an old idea of Cantillon and Hume, Smith explained

5 Cf. Raphael & Macfie’s introduction to TMS, Elsner (1989), Evensky (1992), Kennedy (2005:52), and Ashraf

et alii (2005), where Grampp’s expression “the moral hector”, is quoted. 6 On the distinction between formal / informal institutions, see North (1990). Etzioni (1986) explores the effects

of the internalization of moral obligations upon individual utility. Song (1995:441) teases out the social origins

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that in the professions that require a high degree of trust from the employees “on account of

the precious materials with which they are intrusted [sic]” –like the goldsmiths and jewellers-

a higher wage should be granted. Similarly, the reward of liberal professions –like the

physician and the lawyer- must be high enough to remunerate first, “the confidence” reposed

in them, secondly their “rank in the society which so important a trust requires” and thirdly,

their investment in time and money for their education (1976b, I:118). At last, Smith

extended the idea of trust to credit activities to explain that it rests on personal confidence:

When a person employs only his own stock in trade, there is no trust; and the credit which

he may get from other people, depends, not upon the nature of his trade, but upon their

opinion of his fortune, probity and prudence (idem).

There is no doubt from the above that Smith viewed trust as a result of moral

commitment, although he says little about its emergence (Bruni-Sugden 2000).

Trustworthiness in business activities arises because exchangers have internalised moral

values like “fairness” and “justice”. Smith believed them to be innate traits:

for one man to deprive another unjustly of any thing, or unjustly to promote his own

advantage by the loss or disadvantage of another, is more contrary to nature, than death,

than poverty, than pain, than all the misfortunes which can affect him, either in his body, or

in his external circumstances (1976a:138, emphasis added).

The idea that justice rules the exchange relation is also present in the Wealth of Nations:

every man, as long as he does not violate the laws of justice, is left perfectly free to pursue

his own interest in his own way, and to bring both his industry and capital into competition

with those of any other man, or order of men. (1976b vol. II:208)

As long as economic agents follow the rules of justice, trustworthiness is at work in

commercial exchange relations where ‘self-love’ is the principal motive. People do make

appeal to the ‘self-love’ of others when they exchange, but they trust one another knowing by

of morality in Smith.

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empathetic identification that the other will restrain himself from hurting his interests.7

But only human nature is constant. Human character, as well as the belief in trustful

behaviour, evolves together with society (Elsner 1989:203). Smith has placed great

confidence upon the ethical merits of economic growth in the long run: “The habits, besides,

of order, economy and attention, to which mercantile business naturally forms a merchant,

render him much fitter to execute, with profit and success, any project of improvement”

(1976b, vol.I:433).8 Nonetheless, far from considering the economic process as an end in itself,

he estimated that “wealth and greatness are mere trinkets of frivolous utility” (1976a:183),

while he also deplored the alienating effects of rent-seeking upon human character. What was

more important to his view was to ensure the rule of reasonable institutions and “natural

liberty” for citizens, which constitute the only final goals morally acceptable. This is why he

insisted, as a therapy, upon the necessity of the systematic cultivation of ethical citizenry

through education (Evensky 2001:515).

3.2 Senior

Nassau William Senior was the first economist ever to establish the distinction between the

Art and the Science of Political Economy, in his opening lecture before the University of

Oxford, on the basis of an argument of heuristic efficiency: to establish truths of some

generality, the economist needs “to rest on very few general propositions”, exceeding thus the

particular circumstances that affect the matters of the “practical branch of the science”

(1827:7-8). This is why in his Outline he has traced a sharp demarcation line between the

scientific and the normative discourse in general: “Political Economists… confine their

attention to Wealth, and disregard all consideration of Happiness or Virtue” (1965:3). These

7 On the idea of empathetic identification and its relevance in the Wealth of Nations, see Fontaine (1997).

8 On the moral effects of growth in Smith see Hirschman (1976), Prasch (1991) and West (1996). Smith

explicitly recognised the alienating effects of the extended division of labour on workers’ character and

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are the subject matter of the moralist who is responsible to advise us “how to use those

faculties… for the purpose of promoting our happiness”, using materials from many different

sciences (1852:24). Following Ricardo’s abstract representation of human conduct, Senior

advances the methodological clarifications necessary to justify the economist’s sole

occupation with the objective effects of a unique motive, the desire for wealth, just as J.S.

Mill did in the very same year: “having stated that a given conduct is productive of wealth…

his [the economists’] error would consist not in confining his attention to Wealth, but in

confounding Wealth with Happiness” (1965:4).

However, Senior was totally aware of the fact that human conduct is influenced by a

multitude of conflicting motives:

the machinery of civilised society is worked by so many antagonist [sic] springs; the dislike

of labour, the desire for immediate enjoyment, and the love of accumulation are so

perpetually counteracting one another and they produce such opposite conduct, not only in

different individuals, but in whole masses of people… (1827:8-9).

Consequently, references to moral considerations were included in his theoretical analysis.

The motive of “the desire for wealth”, very central to economic theory, is subject to

modifications to take account of the differences “in individual and national character”

(1965:27). Not every individual feels the same “unsatisfied desires which he believes that

additional wealth will gratify” (idem). The efficacy of this desire depends greatly on the

social conditions of accumulation. Hence, “the greatest and longest continued sacrifices will

be made in those countries in which property is most secure and the road to social eminence

is the most open” (idem). And he explicitly mentions Holland, Great Britain and “the

countries that have derived their institutions from Great Britain”, meaning most probably the

US and Canada. Furthermore, the motive of “the general desire for wealth” was not limited

intellectual ability (1976b, vol.II:302)

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solely to the idea of obtaining “additional wealth with as little sacrifice as possible”. It was

combined with the motives for social power and distinction. As wealth determines the

individual’s rank in society, “the best standard of value for philosophical purposes appears to

be the command of labour” (1965:187). Since “labour is the principal instrument of

production”, the more wealth someone possess, the more employment he/she is able to

employ and command, and so the more powerful he/she becomes. There is then a direct

proportionality “in the command of labour and in the rank in society which that command

gives” (1965:199).9

Senior mentions ‘trustworthiness’ about five times in his Outline as a “moral quality

of the labourer” that affects both the “productiveness of labour” and its remuneration.

Discussing at length Smith’s five exceptions to the canon of the general equality of wages,

Senior has particularly insisted on trust “reposed in the workman” as the cause that influences

the productivity of labour and the rate of wages. He concluded that although trustworthiness

may “arise from a peculiarly happy natural disposition”, it is mostly a matter of education:

as a general rule, trustworthiness is the result of early moral cultivation, and in that case is

as much to be considered a part of a man’s immaterial capital as his prudence or his

knowledge (1965:208 our emphasis).

The notion of trust is also discussed in distribution theory. Referring again to Adam Smith,

and to his analysis of the remuneration of “the labour of inspection”, Senior concludes that he

“confines the term wages to the remuneration for simple labour; including under the word

labour the endurance of all its attendant hardships”, of which the trust reposed in the manager

forms an essential part (1965:133). Lastly, the lack of trust is mentioned as a “chief obstacle

of the unwillingness of capitalists” to invest abroad. Differences of language, habits or

government, are considered to be smaller difficulties in transferring capital from one country

9 Cf. Karayiannis (2001:20), who traces the origin of that motive back to Malthus.

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to another (1965:225). As in the case of Adam Smith, though using a less imperative and

coloured discourse, Senior viewed trustworthiness as a moral quality that guides individuals

during their economic activities.

3.3 Mill

In his first methodological essay, published in 1836, John Stuart Mill aimed to distinguish the

Science from the “Art” of Political Economy in the same way as Senior. The two fields differ

from one another in their scope, content and grammatical syntax (1967:313). The theoretical,

causal law-like and “indicative” mode of Science differs from the practical, rule-making and

“imperative” mode of the Art of Political Economy. From the moment that Science confines

itself to be a “collection of truths” and not “a body of rules, or directions for conduct”, moral

and political neutrality follows immediately as a consequence.

In the same Fifth Essay Mill defined further the domain and the method of Political

Economy “proper to it”. Its distinctive trait lies in its abstract character; though social

phenomena are complex and produced by a “concurrence of causes, those causes must be

studied one at a time”. Mill believed that every class of human affairs has its own,

“exclusive” central motive and that “Political Economy considers mankind as occupied solely

in acquiring and consuming wealth” (1967:322). However, he did recognize that no “political

economist was ever so absurd as to suppose that mankind are really thus constituted” (idem).

In real life the central economic motive -the desire to acquire “the greatest amount of

necessaries, conveniences and luxuries”- operates concurrently with a number of non-

economic motives, such as cultural or moral ones. Therefore, economists explain only what

people tend to do during their economic activities alone. In other instances, added Mill, when

human conduct is motivated by some non-economic law of human nature, the social

phenomenon “belongs to some other science” (1967:331).

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Mill had in addition conceived a hierarchical three level structure of social laws in a

way that higher-level laws result from the combination of lower-level laws; from the bottom

“laws of the mind”, to the midway laws of human character formation -which constitutes the

subject matter of the future science of Ethology- and finally to the more abstract laws of the

different branches of Social Science on the top, such as economic laws.10

In this way, social

phenomena appear to be “the result of a composition of the laws of psychological and

ethological phenomena” (1973:896). Because Ethology explores how human character

interacts with social circumstances, it “will serve for the ulterior science which determines

the kind of character produced in conformity to those general [psychological] laws, by any

set of circumstances, physical and moral” (1973:869). Following Smith, Mill openly

recognised that human behaviour is moulded by moral conventions and norms. 11

As was

rightly pointed out, in Mill “the main mechanisms that tie together the performance of the

economic system and its evolutionary process are ethics and ethology” (Witztum 2005:254).

Through ethological laws the moral “circumstances almost peculiar to the particular case or

era” (1967:333) are taken into account by economists.

In his Political Economy, one may easily observe how specific social norms and

values and their influence on economic activity are taken into consideration. Trustworthiness

is explicitly mentioned:

The advantage to mankind of being able to trust one another, penetrates into every crevice

and cranny of human life: the economical is perhaps the smallest part of it, yet even this is

incalculable (1969:111, emphasis added).

Like Smith and Senior, Mill also discusses at length its importance in labour relations.

Besides the usual intellectual qualities like “practical good sense”, “quickness of perception”,

10

On Mill’s hierarchy of social sciences cf. Persky (1995); Redman (1997:332-3); Witztum, (2005:259). 11

On the social nature of rationality in Smith and/or Mill cf. Song (1995), Jensen (2001), Zouboulakis (2005),

Witztum-Young (2006).

14

or “natural comprehension” which improve significantly the “productiveness” of labour

(1969:108-9), he also recognizes that “the moral qualities of the labourers are fully as

important to the efficiency and worth of their labour, as the intellectual” (1969:109. Cf.

p.184, 385). Mill insists particularly on the positive effects of trustworthiness upon

monitoring and contracting costs:

As the standard of integrity in a community rises higher, all these expenses become less.

But this positive saving would be far outweighed by the immense increase in the produce of

all kinds of labour, and saving of time and expenditure, which would be obtained if the

labourers honestly performed what they undertake; and by the increased spirit, the feeling of

power and confidence, with which works of all sorts would be planned and carried on by

those who felt that all whose aid was required would do their part faithfully according to

their contracts (1969:110, emphasis added. Cf. p.886, 910).

The above quotation reveals the true nature of trustworthiness as a result of moral obligation

and commitment. As was recently said, “the moral mechanism turns people into self

monitoring agents” (Casson 1993: 69). One can easily find more evidence by looking at the

far too many passages in Mill’s philosophical writings, like On Liberty and Utilitarianism. As

an example, in discussing the role of education as an essential means to elevate social

morality, Mill made extensive use of the idea of social approval and esteem–as Smith did one

century earlier. Because he believed that “men could not bear the contempt or disesteem of

their fellows” their actions are under the constant scrutiny of public opinion. As it was

argued, “individual rectitude was to be maintained through the coercive use of social norms”

as they were expressed by public opinion and internalized through moral cultivation (Duncan

1978:255). Hence, Mill concluded that “the ultimate sanction of all morality … [is] a

subjective feeling in our minds” (1972b:26). Trustworthiness works through this internal

mechanism that guarantees social morality. His famous appeal to “the golden rule of Jesus of

Nazareth” is relevant to the ethical origin of trustworthiness: “To do as you would be done

15

by, and to love your neighbour as yourself, constitute the ideal perfection of utilitarian

morality” (1972b:16).

4. Conclusion: no market efficiency without trustworthiness

Only recently, economists are trying to take account of ethical norms and values that prevail

in different socio-economic contexts, beyond what is assumed in the standard behavioural

model. Khalil (2003) has recently reviewed three different answers as to what the origin of

trustworthiness is. To his view trust can not emerge as the result of rational choice, or as the

result of people’s taste, nor as a trait of the human personality. According to the reviewer, an

agent “acts trustworthy in order to self-verify his optimally chosen identity” (Khalil 2003:

xxv). Yet, our analysis of this issue in Classical Political Economy has revealed that trust can

simply be the result of commitment to certain moral principles vital to a civil society worthy

of its name. Smith, Senior and Mill thought of individuals always in relation to one another

that have internalized in their plans the “sentiments of their fellowmen”. Apparently, for

Classical Political Economists there has never been any ‘Robinson Crusoe’ situation.

Production and distribution were seen as social activities presupposing the existence of and

the interaction with other individuals. Therefore, and besides the importance of self-interest

as a general rule of conduct in economic activities –very useful as a theoretical premise-, the

Classics believed that commitment to non-egotistic moral values dramatically shapes

individual preferences and final decision making while it also promises social cohesion. For

that reason, and unlike modern rational choice theorists, they have incorporated them into

economic analysis as endogenous to interpersonal relations.

The notion of trustworthiness in particular, was seen as a general ethical precondition

for markets to work efficiently and as an important asset of the national social capital.12

Mill

12

For a suggestive account to the idea of trust as part of social capital see Bruni-Sugden (2000), who

16

thus wrote that “general distrust [is] commonly called panic” (1969:544). The lesson from the

Classics is this: only when people act morally, having internalised moral values like

trustworthiness, they may act properly for their own benefit as well as for the benefit of the

general interest.13

We have seen how trustworthiness positively affected labour relations,

financial transactions and capital transfers. Of course, and as a result of the evolution of

capitalism from 1776 to 1848 -that is from the first edition of the Wealth of Nations to the

first edition of the Principles of Political Economy-, Smith was much more optimistic as to

the ethical merits of growth and its positive influence on the morality of individuals and their

trustworthiness, than Mill. Nevertheless, together with Senior, all-three had great faith into

the power of education as an effective means to promote trustworthiness.

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