Trust, Values and False Consensus

Individuals’beliefs about the trustworthiness of a generic member of the population (trust beliefs) are both heterogeneous across individuals and persistent across generations. We investigate one mechanism yielding these dual patterns: false consensus. In the context of a trust game experiment, we show that the relationship between behavior and beliefs is consistent with individuals extrapolating their trust beliefs from their own trustworthiness– i.e., more (less) trustworthy individuals form more optimistic (pessimistic) trust beliefs– and that this tendency continues even after substantial learning opportunities. We go on to provide evidence suggesting that one’s own trustworthiness can be traced back to the values parents transmit to their children during their upbringing. In a second closely-related experiment, we again document patterns in trust beliefs consistent with false consensus and estimate the economic consequences of these miscalibrated trust beliefs to be potentially substantial: miscalibrated trust beliefs lower our participants’earnings in the trust game by about 20 percent, on average. ∗We thank Guido Menzio and two anonymous referees for comments that substantially improved the paper. We are also grateful to seminar participants at the Bank of Spain, the California Center for Population Research at UCLA, the Einaudi Institute for Economics and Finance, the Kaler Meeting at UCLA, the FEEM conference on the Economics of Culture, Institutions and Crime, the EALE/SOLE joint conference in London, the 9th IZA/SOLE Transatlantic Meeting of Labor Economists, the seventh International Meeting on Behavioral and Experimental Economics, the Higher School of Economics in Moscow, the London School of Economics, the University of California Davis, the NBER Political Economy Meeting, University of Mannheim, Universidad Pompeu Fabra, University of San Diego, University of Siena, Stanford University and Toulouse University for helpful comments. Luigi Guiso thanks EIEF for financial support and LUISS University for making the LUISS lab available. Paola Giuliano thanks the UCLA-CIBER grant for financial support and the Russell Sage Foundation for its wonderful hospitality.