Citation 一橋大学研究年報. 経済学研究, 46: 283-287 Issue Date 2004 ...

Hitotsubashi University Research Series, Economics .0
A Study of the Relation between Trust and
Economic E$
ciency
Kazuhiro Arai
Abstract
This paper critically reexamines general equilibrium theory using
the concept of trust among economic units. In particular, it argues
that there is a serious defect in the first proposition of welfare
economics. The reexamination first focuses on the problems of
contract incompleteness and information asymmetry inherent in
many transactions, and shows that trust is necessary for economic
e$
ciency when those problems exist. It then demonstrates that
some assumptions made regarding production functions and utility
functions in general equilibrium theory generate an improper
definition of economic e$
ciency. It is shown that trust is
indispensable for e$
ciency not only in organizations but also in
markets and societies in general. This paper proposes that trust
needs to be maintained through group pressures as well as
individual e#
orts. One of the implications of this paper is that
people should modify their view of freedom because it is influenced
by general equilibrium theory, which has serious defects as shown
in this paper.
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