The Emergence of Trust Networks under Uncertainty: The Case of Transitional Economies - Insights from Social Psychological Research

When uncertainty and risk are associated with economic and social transactions, relatively closed trust networks often emerge to facilitate various types of informal cooperation. In Russia, for example, “blat” is an extensive form of informal exchange that emerged to provide scarce resources and services or favors (Ledeneva 1998; Lomnitz 1988). Moving from a social system in which the dominant mode of interaction is closed groups or networks to more open networks, such as those required to support the transition to a market economy and democratic institutions, is likely to be difficult. Our main claim is that uncertainty and risk (such as that created by corruption and dishonesty) lead to the formation of trust networks that are narrow and closed. One disadvantage of such closed networks of exchange is that they limit access to opportunities outside the network