Trust Puzzle
Highly trustworthy individuals think others are like them and tend to form beliefs that are too optimistic, causing them to assume too much social risk, to be cheated more often and ultimately perform less well than those who happen to have a trustworthiness level close to the mean of the population. On the other hand, the low-trustworthiness types form beliefs that are too conservative and thereby avoid being cheated, but give up profitable opportunities too often and, consequently, underperform. Our [empirical] estimates imply that the cost of either excessive or too little trust is comparable to the income lost by foregoing college. [emphasis added]
More here. How much to trust others does sound like a very important parameter, and it makes sense that errors on this could have large consequences. But it is puzzling that we make such large errors, apparently unable to learn much useful from those around us about how much to trust. I could see how a lack of trust might prevent one from learning from others that one should trust more, but how does trusting too much prevent one from learning from others to that one should trust less?
Perhaps the level of trust to assign another individual is a socially learned skill. As children most of us spend most of our time with family and for the most part our trust in them not only works well but is essential for survival. As we age we encounter people farther and farther removed from family. These strangers face smaller and smaller costs for ripping us off and vice versa. So, the people around we spend most time with whilst very young don't teach us much through action about the skill of assesesing trustworthyness. The binary choice offered to children in the "stranger danger" lesson may actually exacerbate the problem.
We are often quite emotionally damaged by our first encounters with people who take advantage of our trust. Do you remember how that feels? If we are seriously taken advantage of we might switch to mistrust on average - "once bitten, twice shy". Perhaps the frequency and magnitude of initial trustingness and eventual switching has a good deal to do with the social networks we move in. This all seems very testable.
May I join the convo?