Markets and Trust

Over at Cafe Hayek, Don Boudreaux quotes Steve Horwitz:

If we shouldn’t trust “strangers” to educate our children, why should we trust “strangers” to feed or clothe them either? Yet we do so every single day. Civilization is built on turning strangers into honorary kin through institutions that build trust. Education is no different. I’m not interested in forgoing the benefits of the division of labor in a world where contracts and reputation signal trust in strangers.

Steve’s point is brilliance in its simplicity.  Markets foster an enormous amount of trust among its participants.  In fact, trust is central toward market operations: remember that all market transactions are voluntary.  If one party doesn’t trust the other, no transaction will occur.

Markets also severely punish those who violate that trust.  Sure, there are legal actions that can take place, but the far worse is the judgement of the market.  If a firm is untrustworthy, they quickly find themselves facing bankruptcy and an irate customer base.

One thought on “Markets and Trust

  1. All without a panel of “experts”, in a central command bunker, directing consumers on their purchases and businesses on how to best serve. The best judge of products and services are the very people consuming those products and services.

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