Markets and motives - Trust and egoism in welfare markets

Enthusiasm for the expansion of markets in welfare reflects the currency of assumptions derived fi om rational choice theory among policy-makers. This article reviews recent evidence from the ESRC's Economic Beliefs and Behav iour programme that calls into question the basic tenet of the rational cho ice approach - that individual choices are driven by instrumental rationali ty - and argues that welfare markets require a normative framework in which trust plays an important role. Experimental evidence from recent work in e conomic psychology indicates that individuals often display a level of trus t in market interactions that is hard to explain on the basis of simple rat ionality, but that such trust is fragile and easily undermined by egoistic action. Lack of attention to the normative issues which the rational choice approach fails to capture may lead to the design of markets which are inef ficient in meeting the aims of policy-makers and which deplete the moral le gacy on which many welfare markets in practice depend.