This week we thought we would present our own [...]
Trust is essential to a societies prosperity. It is fundamental to economic coordination and underpins the way a society operates. If there is a lack of trust in society, transaction costs are high. There are many types of transaction costs that we incur when we enter into a transaction, and generally, one party always stands to gain more than the other if trust is violated. Therefore, the party that stands the most to lose will often expend resources to ensure that the other party does not violate the conditions of their agreement.