Quote Originally Posted by walrus View Post
Trust and cooperation are regarded as "externalities" (zero costs and values) by economists, but Fukuyama points out that this is wrong, because high levels of trust and cooperation reduce transaction costs. Conversely, it is very very expensive and time consuming to try and do a deal with someone you don't trust, or who does not trust you, if that is, you can do a deal at all.
I think this is absolutely on target. As anyone can attest who has ever worked in an organization (any kind of organization) that had someone within it who was known to be a frequent liar, progress grinds to a halt, because you can never be sure what's going to happen next, even with your supposed allies.

A very important online paper on this topic is "Trust: The Lubricant of Military Operations" by Jonathan Shay. If internal friction is one of the obstacles to military success, then trust is the internal lubricant that reduces this friction.

I'd be very interested to hear other people's opinions of Shay's paper.

RJO