November 1, 2011 § Leave a comment

The Spirit Level shows that income inequality is significantly negatively correlated with the percent of the population who agree that most people can be trusted. This holds across countries and across US states: Mississippi and Alabama, the states with lowest trust, are unequal, while North Dakota and Montana, the states with highest trust, are relatively equal. There’s something to this. There probably is a fairly simple set of causal pathways that connect the variables “inequality” and “trust”. But are these cause-and-effect type pathways or confounding-type pathways?

The book asks: “But does inequality create low levels of trust, or does mistrust create inequality?” This is a false dichotomy. Variables may have a common cause and no effect on each other. To get a more realistic answer, we turn to the literature they cite.

Rothstein and Uslaner:

First, we show by a cross-national statistical analysis that inequality is a key factor in shaping generalized trust, but that there is no direct effect of trust on inequality (the causal direction starts with inequality).
That’s a strong statement. What does this cross-national statistical analysis consist of? A bunch of structural equations and a probit model, which I shall be generous and leave alone. The much stronger argument about causality is qualitative. There’s a short but careful retelling of 150 years of Swedish history that notes that country started off more equal than many, and that their civil service has been a trusted institution since its inception.
A detailed account of the historical development in the Swedish case indicates that it was the impartiality of the government institutions, especially those handling policies related to the labor market and social policy, that made the development of an “historical compromise” between labor and capital possible. This compromise was to a large extent built on “a spirit of trust”  that developed into the well-known “Swedish Model” that came to mark the Swedish society after 1936.
I can’t see how the argument is particularly strong evidence for the causal priority of trust to equality. What it seems to show is that there is feedback, that trust and equality evolved together. To show that one direction dominates the other requires faith in structural equations that I don’t have. To think about this properly, you need to consider interventions, which is tricky: how do you change trust? But that’s a question you need to answer in any case.
What’s frustrating about The Spirit Level is that it doesn’t delve deeply into any particular issue. The questions we really care about are “if we change X, what’s going to happen to Y?” Such questions can rarely be answered definitively. But the book displays so little curiosity toward working in the direction of answers, toward working out what’s causal and what isn’t. I know I’m not the target audience, but it could have been so much more convincing with even a hint of rigor.

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