Networks
Much economic activity takes place with some sort of reference to the future,
such as goods and services or labour being provided now in exchange for
future payment. An employment contract often specifies the responsibility to
carry out current tasks in exchange for promise of a monthly salary. Investment
decisions by private corporations rely on assurances by governments that they
will not expropriate those assets through higher taxes should the investment
prove profitable. Such future-orientated activities are accomplished at lower
cost in an environment of higher trust. When individuals can rely on trust they
do not need lawyers to write expensive contracts, nor does the government
need so many resources to provide the apparatus of contract enforcement and
the judicial system (Knack and Keefer, 1997). While economists have proved
quite adept at measuring the stock of trust at a given point in time they have
found it harder to ascribe trust to particular cultures. Trust could be an inher-
ited cultural variable or a characteristic acquired through repeated interaction;
or people may simply behave as if they were trustworthy because they fear
some sort of legal or personal retaliation.
Recent surveys have helped solve this longstanding problem. The World
Values Survey now contains data from more than 100 countries. The question
on trust asks ‘generally speaking, would you say that most people can be
trusted, or that you can’t be too careful in dealing with people?’ Data from the
US show a gradual decline in trust from the late 1950s to the 1990s. Among
other countries trust tends to be more stable over time. Government perform-
ance tends to be better and economic growth higher in high-trust societies as
measured by this variable. Trust (even more so than education or per capita
income) is strongly related to the faith people have in various government
institutions such as the security of property rights (Knack and Keefer, 1997).
Data from the World Values Survey, reports from the International Social
Survey and the Gallup Millennium Survey for various dates in the 1980s and
1990s show that various religious beliefs also have an impact on economic
variables. In particular they find that belief in hell or heaven has a significantly
positive and monthly attendance at a religious service a significantly negative
relation with economic growth. The important finding is that it is strength of
belief not just belonging to a religion that encourages economic growth
(McCleary and Barro, 2006). Different religions also have different effects on
people’s attitudes. Attendance at religious service increases trust only among
Christians, and is stronger for Protestants than Catholics, but the effect is zero
or negative for other denominations (Guiso et al.,2003). Being raised reli-
giously has a small positive impact on trust. Among Catholics and Protestants
regular attendance at religious services has a more significant positive effect,
but being Muslim,Hindu or Buddhist has no clear impact (Guiso et al., 2006).
Nevertheless,it is still not possible to gauge if this trust is inspired by reli-
gion or is simply a product of continued interaction with people through
membership and participation in a (religious) group. Is it religion that is crucial
264 Patterns and Determinants of Economic Growth