TRUST AND ECONOMIC INTERACTION

Trust means social belief derived from process of experiencing. It becomes an inseparable part of the social interaction; individual with individual, individual with group, group with group or group with individual. The role of trust in social relationship is abstract. The recommendation tradition is the actualization of a strong sense of trust to people, object, service options, or option to do a certain social action.

The raising question when somebody starts to trust the others is what makes him to trust them. The answer of this question can be generated on several considerations that become the people motives in giving trust to the others, include:
1. Because of the ownership of information. This depends on the degree of information and its relevancy in decision making whether it is credible or not. Thus, the degree of confidence can decreased or zero due to the lack of information. In this context, trust is interpreted as knowledge.
2. Because of the rational consideration in decision making that contains risks. As capital investment in the stock market has very high risk, to invest in this area, it is necessary to do the accurate and mature calculations in facing the chances of gains and losses.

Like the example in the trade, the seller delivers to the buyer installment that aims to gain traction and benefit buyers by giving confidence to buyers. Trust into the determination of profit or loss if misplaced confidence to buyers. And this proves what the parties are given the confidence can really be trusted or not.
Trust in Sociology Perspective

Trust in Sociology Perspective

Actually, trust is not central in the sociology discourse, but several studies in recent sociology literature's note that there are values binding individual in social bonding, such as solidarity and voluntary attitude which underline as trust. 

There are three approaches to understand the meaning of trust.
1. Trust as part of self-identity, as well as a social system which can be explained by observing individual behavior and orientation, basically, the trust is self-identity and then evolved into a social system that unites other persons in a relationship, because the trust is basically psychological.
2. Trust is seen as a useful collective attribute for social fabrication. Trust is seen as a social resource that can be engineered to achieve certain goals of the organization.
3. Trust is understood as a form of social values in a society that nurtured by the actions of the community members themselves.

Based on the three approaches mentioned above, it can be concluded at the beginning, trust is no more than personal, psychological and particular norms.

The simple understanding of the trust is: “willingness to take a risk”. It is an interaction based on the sense of confidence, that others will respond as expected, and will support each other. Or, at least people have no mean to harm. So, there is safety feeling in the interaction. This feeling has a range of areas which is defined as: “the circle of people among whom cooperative norms are maintained and kept”.

Trust in Economic Perspective

The definition of the trust has not been found. The definition that is given by several disciplines was different from one to another. Thinking about the urgency of the trust in the economy depart from the reason of the absent of the trust in certain circumstances that affect economic transition, where economic transition is shown as an exploitation arena rather than mutual benefit.

K. Arrow (1975) states that essentially, every commercial transaction has a trust element. And this idea comes from Adam Smith that the people in the same trade can freely meet and the conversation among them usually ends up in a conspiracy to the public to create a high price.

The economic exchange provides an opportunity. For profit, the opportunistic actors will do anything, including providing wrong information to the other. To identify from whom the opportunity is obtained and from whom this opportunity cannot be obtained will need some cost. Therefore, the existence of the trust becomes the element of economic efficiency.

Trust: Social Capital and Economic Interaction

In economic interaction, agents or individuals often engage in an impersonal relationship that is only held together by economic interest, therefore, economic cooperation is not always include ordinary people, although in some cases there is the fact that economic relations are also inherent in inter-personal relation.

The trust between traders and suppliers is formed through the repeated re-interpretation of economic relation. Positive assessment of the both side had a positive impact on economic prospect for further cooperation.

Kinship is very effective means to build mutual trust. Other means is primordial ties, such as professional associations. Thus, the trust is able to be treated as capital that contains practical value in the economic action which is derived from sociology cultural mechanisms, such as religion, tradition and common environment.

Trust, Contract and Transaction Cost

The social capital in the industrial economy is such necessity to work together. As company has to build trust relationship among individual member because they operate according to some ethical norms, thus it will be able to reduce both social and economic cost

Contract as a legal mechanism that regulates the cooperative relations is crucial in overcoming economic problems associated with the trust. Economists argue that this existence contract is made on basis of rational calculation and it has replaced the trust in economic cooperation relation, which affects the formation of cultural independent association.

Contract in legal and economic aspects, can glue the people who do not know each other is a partnership without any prior claim to believe. Trust is not able to replace the function and position of the contract as a legal institution. Contract will be more efficient with the trust, so it can minimize the transaction costs, claims and complaints through government regulations in case of contract cancellation which caused by other factors, such as skulduggery.
The example of trust in our daily life

The example of trust in our daily life

Imagine if you went to the store to buy a carton of milk, but milk Gated found the fridge was locked. If you managed to persuade the owner of the store to pick up milk, you may end up going to think about whether you are going to hand over the money first, or the owner of the store that will deliver the milk first. Because of the lack of confidence between them; trading activity was disrupted.