The Psychology and Economics of Trust and Honesty

It can be quite beneficial to lie and exaggerate — for me to tell you that I am nicer, smarter, or better-intentioned than I actually am. Yet if most of what we heard was false, we would cease to pay attention to it, and communication would effectively stop. However, this is not the case and overall there is enough truth in our interactions to make the exchanges worthwhile. What is it that keeps communication honest enough to be meaningful?

There is an economics of honesty: for communication to be reliable, honesty must be affordable while dishonesty must be prohibitively expensive. This simple rule can give rise to many complex and even seemingly irrational behaviors. And it raises many questions, the most fundamental being what, actually, is honesty — and when do we really want it?

The psychology and economics of honesty applies to many fields. It is not just about the statements we make with our words, but the implicit claims about who we are, what we believe, and how we will act based on the clothes we wear, the gestures we use, the rituals we participate in, etc.

Today, norms of trust and honesty are evolving as much of our daily life moves online. For example, reputations emerge quite differently in a community whose members seldom or never meet face to face. The vast amounts of personal data we place online are changing the dynamics of interpersonal communication. Interface designs have a powerful effect — words can be ephemeral or permanent; people can be anonymous, pseudonymous, or named; and behavioral patterns can be nearly invisible or dramatically visualized. These changes affect us on every scale, from personal interactions to global politics.