Transcript for Paul Zak — The Science of Trust: Economics and Virtue

July 9, 2009

Krista Tippett, host: I'm Krista Tippett. Today, "The Science of Trust: Economics and Virtue." My guest, Paul Zak, is a leader in the emerging field of neuroeconomics. He helps explain how circumstances can dampen the human inclination towards moral behavior, but he also studies how human and economic interactions are driven by trust and says that can be measured and nourished biochemically.

Mr. Paul Zak: Markets are human creations, and they reflect our own human nature. In the kind of decentralized economies we live in, it is based on trust and faith and belief, and that's a good thing. I think it recognizes human dignity. It recognizes that most human beings in most situations are moral creatures and you can trust people to reciprocate most of the time and most of our societies are built around that. Civilization is built around that. Certainly democracy is built around that.

Ms. Tippett: This is Speaking of Faith. Stay with us.


Ms. Tippett: I'm Krista Tippett. In a few breathtaking months, we've culturally moved from seeing Wall Street as an icon of thriving civil society to analogizing its workings with book titles like House of Cards and Animal Spirits. This hour, as part of our ongoing series Repossessing Virtue, we'll look at what science is learning about trust, fair play, and empathy and what these qualities have to do with human character and economics. My guest, Paul Zak, is a pioneer in the emerging field of neuroeconomics.

From American Public Media, this is Speaking of Faith
, public radio's conversation about religion, meaning, ethics, and ideas. Today, "The Science of Trust: Economics and Virtue."

Paul Zak is a professor of economics at Claremont Graduate University and founding director of the Center for Neuroeconomic Studies. He is trained in economics, neuroimaging, and mathematics. His research has centered around a powerful hormone that also acts as a neurotransmitter, oxytocin, which has been dubbed "the moral molecule." It is a kind of physiological signature for empathy. Paul Zak's laboratory has demonstrated that under the right conditions and with the right encouragement, oxytocin drives trustworthy behavior. Only 2 percent of the population, according to his experiments, is innately unresponsive to this physiological stimulus to care about the effects of our actions on others. From those experiments, Paul Zak became interested in the morality of economic decision making, how and where trust comes into that from a neurological perspective. He intensively analyzed the Enron crisis of the early 2000s, finding it a case study for trust gone awry at every level of an enterprise.

Early in his career, Paul Zak charted a correlation between trust or lack thereof with poverty or wealth in different countries.

Mr. Zak: I've been working on models of conflict to understand why countries don't grow. So if there's a lot of conflict politically, socially, even economically, then you see a lot of disruptions and you see a lack of progress made in terms of living standards. And so I had this idea at a conference that if I am such an expert in conflict, I should be an expert in the absence of conflict. And as I started thinking about that, I thought, you know, what captures the essence of conflict is really trust. When trust is high and we can shake hands and do a deal, then my sense was that, you know, economies would grow faster. So delving into that for a couple years, I discovered that trust was sort of the big gun economists have been looking for. It's really the most powerful lever we've found to date to understand why countries are rich or poor, partially because trust captures — when trust is high, everything in the society works well. The government works well. The social sector works well. The economic sector works well. So it's sort of one variable that captures, hey, things are going good or things are going badly.

Ms. Tippett: And when you say trust, I mean, are you talking about trust in the structures of an economy, trust in markets, trust in other businesspeople? I mean, is this trust as manifest on many levels?

Mr. Zak: So it's really trust in other people.

Ms. Tippett: OK.

Mr. Zak: So it turns out that trust in other people correlates very strongly with trust in government, how well all these other sectors of the economy work. And so once this work became very well known and the World Bank flies me out, you know, "How do we implement this stuff in these less developed countries?" the question I always got was, "Well, how do two people decide to trust each other?" Because the data we were using were, "How much do you trust other people in your country in general?" But the next question was, "Why would I trust a complete stranger and particularly in a tangible way? Why would I give money to a complete stranger, particularly if I'm never going to see him or her again?" And that led to this investigation of the brain mechanisms behind trust and our discovery of oxytocin as this trust molecule.

Ms. Tippett: So that is the work you're doing now, and it comes under this category of neuroeconomics, which I think is a word that many people won't have heard. So I wonder if you could just tell me, I mean, is that a new field that you've helped create? That's kind of the sense I have.

Mr. Zak: That's correct. So I started doing this in 2001 and 2002 and there really wasn't a name for this, although this name was kind of floating around in the air. And neuroeconomics really looks at the brain processes that are active that are present when we make decisions. Now you notice I didn't economic decisions; I just said decisions.

Ms. Tippett: Yeah.

Mr. Zak: So in some sense all decisions are economic; that is, they involve trade-offs. Should I marry girl A or girl B? Should I have three children or two children? So any decision making process involves evaluating alternatives, and that's really the essence of economics. So because people couldn't report to us in our laboratory experiments why they were trusting strangers with their own money, which they do quite readily in laboratory, we needed some other way to figure out what they were doing. And so we had this idea to measure brain activity while they were making decisions, and subsequently this field has now kind of taken off and has a life of its own. But at the time it was, you know, sort of the world's stupidest idea.

Ms. Tippett: Well, say some more about that.

Mr. Zak: OK. Because economists assume that people — when money's on the line, you know, people are very thoughtful. They will take some time. They're informed. There's this sort of big cognitive process that leads to efficient decision making. But in fact, we know from our own lives that sometimes people make mistakes, even people with big brains like us, sometimes we make mistakes. And why is that? Further, I realized we're taking a shot at traditional economics that assumed that people were thoughtful and slow and deliberative and we don't see that in the world.

Ms. Tippett: Right.

Mr. Zak: We see people making gut decisions, quick decisions, sometimes wrong decisions maybe for the right reasons, but decisions that go horribly wrong. And maybe some of those lead to things like financial crises. Certain booms and busts are not sometimes rational. They are overreactions or underreactions to certain environments.

So I think in the environment right now, we're seeing a gross underreaction to what looks to me like lots of bargains in real estate and various asset classes, because there's this overwhelming sort of sense of pessimism. And three years ago, there was just way too much euphoria, you know.

Ms. Tippett: But backing up a little bit, I do think even though you've been doing this work for several years and you and other people in other disciplines, I mean, because it looks like neuroeconomics draws on economic theory as well as neuroscience and psychology, endocrinology. But I think you're right, and I think that one of the kind of — there was this shock when the economic crisis hit last fall, because it did seem like we had all been functioning, to some degree against the evidence, on an idea that because we were dealing with economics, which had to do with numbers, somehow it was rational and logical. Right? I mean, many of us had suspended our judgment in different ways. And what was fascinating to me is that suddenly what we were talking about was faith in the markets being crushed and trust in the markets being crushed.

Mr. Zak: Right.

Ms. Tippett: So suddenly we were seeing that what was exposed was, you know, you could almost say the human condition. I mean how much emotion and irrationality is always in there.

Mr. Zak: I agree with you completely. You know, markets are human creations, and they reflect our own human nature. And in the kind of decentralized economies we live in, it is based on trust and faith and belief, and that's a good thing. I think it recognizes human dignity. It recognizes that most human beings in most situations are moral creatures, and you can trust people to reciprocate most of the time. Our studies find 98 percent of people are reciprocators and the 2 percent have very unusual brains, and we can talk a little about that.

Ms. Tippett: Yeah.

Mr. Zak: But 98 percent of the time, people will do what you expect them to do. What that means is that we don't need a policeman and a lawyer in every transaction, and that's great, because now, just like these high-trust countries that I spoke of before, we can effect transactions quite readily and easily. So the cost in engaging in transactions is lower, more transactions occur, and we have more wealth creation and greater prosperity. There are downsides to that. For example, people will find loopholes and try to exploit them, which certainly people of the finance industry did. But by and large, I think having these decentralized economies that are based on most people most of the time being moral, being reciprocal, means that we can do lots of things we couldn't do otherwise. And most of our societies are built around that. Civilization is built around that. Certainly democracy is built around that.

Ms. Tippett: You wrote: "Studies across several scientific disciplines are accumulating evidence that modern free economies can only function if most people most of the time behave morally. Surprisingly, this research also shows that the freedom to exchange in markets may itself lead to a society where individuals have stronger moral values. Put more succinctly, markets depend on and promote virtue."

Now, that is not the story we would tell ourselves about the reality of the economy as it started to reveal itself to us in the latter months of 2008. Do you feel that what you wrote then, you know, what you have been discerning in your research was wrong? Or was it prescient?

Mr. Zak: I'm going to stick by that. I think, you know, the news is overwhelmingly about stories in which we have failures. I think in that same essay I said even the most ardent capitalists get a small thrill when they see the kind of evildoing CEOs do the perp walk. You know, the Jeffrey Skilling, Kenneth Lay.

Ms. Tippett: Right.

Mr. Zak: And we like to see people who have cheated punished. Most of our great novels and movies are about that theme to one extent or another. So by allowing individuals the freedom to engage in transactions without coercion, it also means you're allowing some people to cheat and it's that kind of hardcore 2 percent who have a brain dysfunction in this brain chemical that we found instantiates empathy, instantiates care for someone else's welfare. I'm not saying, by the way, that Jeffrey Skilling doesn't have this brain mechanism. He may or may not. I haven't studied him. But we have to allow for some cheating.

Think of this as a legal analogy, à la sort of Minority Report. If I looked into your head and I figured that in 10 years from now you're going to engage in some crime and therefore I arrest you now, which who knows? But if I allow you go through your life and if you do engage in misbehavior, then I'll try to, after the fact, capture you, punish you, encourage you not to do that again — me being as a society. As a society, we'll try to do that. But I don't want to beforehand say, "No, you can't engage in all the things in life. You can't go one mile an hour over the speed limit. Even if you have a sick child in the back seat and you're rushing him or her to the hospital, it's not allowed." So I think by having this freedom to innovate, do things a little differently, perhaps even to bend the rules, allows for greater freedom, greater prosperity, greater innovation. It also allows for cheating, and we need an appropriate regulatory framework that captures, discourages, and punishes cheaters. And I think what we found in this recession is that we didn't have a sufficiently strong framework within the financial services industry.

(Sound bite of music)

Ms. Tippett: Neuroeconomist Paul Zak. I'm Krista Tippett, and this is Speaking of Faith from American Public Media. Today, "The Science of Trust: Economics and Virtue."

(Sound bite of music)

Ms. Tippett: Before Bernard Madoff, Jeffrey Skilling and Kenneth Lay were icons of a gross violation of the trust of employees, shareholders, government, and customers. But in a book he edited, Moral Markets, Paul Zak also told the lesser-known story of Cliff Baxter. Baxter was a vice chairman of Enron who protested corruption as he saw it grow internally. He resigned his position in 2001, just a few months before Enron's collapse began. In early 2002, as the human cost of Enron's excesses unfolded, he apparently committed suicide. By many accounts, Cliff Baxter had a strong moral code. His story is a contrast to generalizations fueled by high-profile coverage of out-of-control corrupt executives. But Paul Zak sees it as an exemplar of the moral inclination for which human physiology equips us, given the right circumstances.

Mr. Zak: So let's bring some science to bear in this. So I just made a bunch of perhaps interesting or outlandish claims about people having sort of a moral sense. But in the last five years, we've begun to find the chemical basis for this. And we've discovered this molecule called oxytocin that lives in the human brain, and in particular human beings, it's particularly potent at making us care about the outcomes of others. So we initially found that when someone trusts you with their money intentionally — "I'm going to give you $20 and let you control it" — that the more money someone entrusts to you, the more your brain releases this molecule and the more you tend to reciprocate. When the person says, "Would you like to give some of that back to me," even though you don't have to, you do. We've now found this substantiates generosity. If I have more, you have less and visa versa. When we give people, human beings, synthetic oxytocin we can induce them to be more generous towards strangers, more generous towards charities.

And we very recently found that when we watch and we show experimental subjects an emotionally compelling video, a video of a man whose four-year-old son has terminal brain cancer, that there's a big spike in the release of oxytocin, and people are subsequently much more generous towards a stranger. They're more generous towards charities. So somehow this molecule in our brain has allowed us to live in large groups of people where we have something in our heads that says, "This person safe, this person not. This person, I want to be around, this person I don't want to be around." So it's kind of a trust detector. And in a very real sense, it connects us to other people. It allows me to sort of emotionally mirror what other people are doing. And classically, oxytocin is associated with childbirth, reproduction in mammals.

Ms. Tippett: Right. I was going to say with maternal love and bonding. Right?

Mr. Zak: Yeah. And in mammals care for offspring. And what we've shown the last five years is that it makes us care about complete strangers. I should say, in these experiments, we've run them in a laboratory. You're in a partitioned computer station, and all these interactions happen through a computer. So you're not even getting the smiles, the open expression, the happiness. So I think what this shows is that human beings are almost unique among animals in which we can't help but care about other people's welfare, and we care about what they think of us as well. And that kind of keeps us on the straight and narrow. Not all the time; we're adaptable and this system shuts down under high levels of stress.

Ms. Tippett: Right.

Mr. Zak: And so I've written in the Moral Markets book about the kind of environment that was created at Enron that put people under enormous amounts of stress, survival stress to keep their job. And so if you're under such enormous stress, then the system shuts down and you get to be in this "I need to get through the next two hours" mode as opposed to "I'm going to take care of people around me and this is a win-win situation."

Ms. Tippett: Well, and I have to say I thought that was one of the most interesting learnings. It got me wondering if the accelerating stress that's kind of been built into our everyday lives might have contributed in a very real way to some of the bad and really immoral decision making in our economy in the last few years.

Mr. Zak: I tend to agree with you. Economists talk of the cleansing effect of recessions. So recessions are necessary because they kind of cull out the companies that are not providing the best customer service, that are not making a profit, that are not providing some product or service that people need. And when those businesses go out of business, then those resources are redeployed to more important uses. The machines are reused; the people get different jobs. And so this keeps the economy kind of efficient. We don't want to kind of limp along and have high levels of inefficiency just because we love the name General Motors or love the name of some company if they can't kind of keep up with the herd. So competition drives that and that's an important part of maintaining efficiency.

But I think the same thing can happen in individual lives. I think as we get towards the end of every boom period, today or two years ago, the end of the 1990s and dot-com bubble, the end of the '80s and this kind of "me," "greed" generation, I think we do get out of whack because human beings are adaptable and we are watching what other humans are doing. We also become adaptable to this sort of yuppie, "more stuff for me" lifestyle.

So I think, from a spiritual perspective, that recessions are also cleansing. So I think it's very important that we don't shy away from recessions and we don't try to outlaw them. I think we should say, "Hey, there were excesses. This is how the excesses are corrected. And the excesses were both kind of on the macro level and even perhaps in my own life. Maybe I got a little over-excited about the extra bonuses I was getting and the bigger car. And now I want to sit down and reevaluate what's really important to me." So I think there are great analogies between the micro and the macro, and we should embrace that.

Ms. Tippett: Mm-hmm.

Mr. Zak: Having said that, the stress issues are strong. One of the pieces of advice I like to give is: Turn off your TV. Don't listen to the pessimistic news every second of the day. Get back to …

Ms. Tippett: Right. Because there's another kind of stress that's created with the things that are going wrong now, right?

Mr. Zak: Absolutely. So this is the time to reach out to your neighbors, as I certainly have when people around me have lost their jobs, and many others have as well. You know, do the things that are important. Do the things that are human and humane and get back to a sense of where we want to be as individuals and as a human species.

Ms. Tippett: Let me just ask you this, again from the perspective of your scientific research. If a stressful culture, inside our workplaces and outside it, had this power to diminish our instinct, I think what you want to say is our inclination to care morally about the consequences of our actions more, does stress also in a moment like this, in a moment where the economy is really in crisis and there are a lot of bad effects of that, does this kind of stress also make it harder for us, again, to reach out to others?

Mr. Zak: I think there's two ways to answer that. The first is that appropriate levels of stress are very good for human beings. So there's sort of this misnomer that stress is bad. Too much stress is bad, but also too little stress is bad. So there's sort of this inverted U-curve, if you can see that in your head. There's sort of this sweet spot for stress that focuses your attention. So I think that when we're in that sweet spot, when we're focused, our memory's better and we're thinking clearly and we've got to figure out what to do next, that's actually very good for human beings and actually all other animals as well. So I think this is a time when we can use that notion of appropriate stress or good stress.

Ms. Tippett: OK.

Mr. Zak: And use that also to shed some of the inappropriate stress.

(Sound bite of music)

Ms. Tippett: Neuroeconomist Paul Zak.

(Sound bite of music)

Ms. Tippett: You state some true and obvious things that I think feel less obvious in our time, that merchants and market exchanges in essence are supposed to be, initially were, and often are about increasing the well-being of neighbors and complete strangers, that economies are driven by human beings. You know, markets are human inventions — these are your words — and market exchange is a social act. But, you know, I was also thinking about this in connection with this phenomenon we had in this economy that's now failed, this housing market. All these mortgage lenders, some of them working with very small firms, enacting transactions, which were risky at best and reckless with other people at worst. But I also wondered in that connection if what you have are these financial networks, these structures that had become — that people were so many steps removed in fact from the consequences of those actions, that that also kind of depersonalized this human dimension of the market that makes trust more possible.

Mr. Zak: I agree completely with you. You know, when you took your mortgage out from your local banker who you saw every Friday when you deposited your paycheck …

Ms. Tippett: Yeah.

Mr. Zak: … it's a much different story. And you could tell him or her, "Gee, I lost my job and I may not be able to make my payment this month." I think you're right: Once we so decentralize all kinds of transactions, break them into little pieces — which, by the way, is exactly what happened at Enron — you break up decisions into little pieces and you stop having this connection to the other human across the desk and it becomes just about churning, about turning over more volume. Having said that, I think this housing market bubble did identify a regulatory failure, that this, particularly in the swaps market, of this market was gigantic and only grew up in the last 10 years and was more or less unregulated. And that was a problem. So, again, the recessions are valuable, because these bubbles can't go on forever. And you say, "Well, this isn't appropriate. This is not what we wanted. This is not what these instruments were designed to do, and therefore, as a society we need to choose to put some structure on this."

So I think a simple example of this would be, because I live in a semi-rural area, we have a lot of farmers who sell fruit by the side of the road. So we have these stands. They're not manned, so no one's there. There's a box and there's a pack of oranges.

Ms. Tippett: Right.

Mr. Zak: You know, the box is screwed down to this big wooden stand. So the box is not left there for you to take away; it's screwed down. And occasionally, you know, people must steal them, but for the most part, people put money in and take a bag of oranges and there's still three or four bags out there. So if you tempt people enough, you're going to encourage kind of bad behavior. So, again, as a society and as families, we always try to find that appropriate boundary between recognizing human morality and dignity and not tempting people with a vice. And so if we tempt people enough, and I think that's what happened in the mortgage market …

Ms. Tippett: OK.

Mr. Zak: … you know, it was basically money for nothing. You know, sign people up, fake the numbers, and give people loans out. That's not appropriate. That's not the way we want to run a society, a business, and your personal finances.

(Sound bite of music)

Ms. Tippett: Neuroeconomist Paul Zak.

Another scientist I've interviewed in the past, Dr. Esther Sternberg, has broken new ground in describing how the human stress response works. She describes the economic crisis as a perfect storm for stress, and she has wisdom on how to alleviate stress and simultaneously improve our own health and that of our communities. You can listen to her and other wise voices from our Repossessing Virtue series on moral and spiritual aspects of economic crisis. That's at our Web site,

And on the Speaking of Faith staff blog, SOF Observed, we share more detail on a trust game Paul Zak describes in his article "The Neurobiology of Trust." Read more about his research on the biological foundations of human trust and share your comments at

(Sound bite of music)

Ms. Tippett: After a short break, Paul Zak analyzes Bernard Madoff. I'm Krista Tippett. Stay with us. Speaking of Faith comes to you from American Public Media.


Ms. Tippett: Welcome back to Speaking of Faith, public radio's conversation about religion, meaning, ethics, and ideas. I'm Krista Tippett. Today, "The Science of Trust: Economics and Virtue," part of our ongoing series "Repossessing Virtue."

My guest, Paul Zak, is a professor of economics at Claremont Graduate University, and he's the founding director of the Center for Neuroeconomic Studies. He has studied a powerful commonly occurring hormone, oxytocin, which some have dubbed the "moral molecule." His laboratory experiments have found that oxytocin generates and supports caring and trustworthy behavior in most people with the right kind of encouragement. Only 2 percent of participants in his studies appear to be innately impervious to this physiological stimulus to care about the effect of their actions on others.

Drawing on this research, Paul Zak has analyzed how trust works as a catalyst in successful human relationships and economic life. On the Ponzi scheme of Bernard Madoff, for example, Zak has pointed out that they key to a con is not that you trust the con man, but that he shows he trusts you. And so I asked him how can people recover when such a complex dynamic is violated?

Mr. Zak: So we studied this in the laboratory, and we find that when people are distrusted, when people don't reciprocate, when someone doesn't show they trust you, both men and women — but men in particular — have a strong aggressive response. They release testosterone, and they really want to punish that person. So we see this in the Bernie Madoff case where people are sending him …

Ms. Tippett: Or in the AIG bonus …

Mr. Zak: Sure. These guys are …

Ms. Tippett: Yeah, that public anger.

Mr. Zak: … people who don't play nice, and we like to see them punished. And that's an important part of maintaining the line between appropriate and inappropriate behavior, is that we have innate mechanisms in our brain that want us to punish people and make it fun, in fact, to punish people who don't follow the appropriate social norms. So Madoff needs to be punished. The AIG giant bonus guys really need to be punished. And that's OK. And we've now done that as a society. Most of us don't go over and try to beat up these people, but we have a legal system that kind of does that for us. And that's an important way in laboratory experiments to sustain cooperation. So if you're having an interaction and you begin to play badly, if I have an option to punish you, I can encourage you to be cooperative. So oxytocin and the mechanisms in our brain that motivate moral behaviors are not perfectly tuned to the environment that we live in. So they are blunt instruments. They are not modifiable very rapidly.

Ms. Tippett: OK.

Mr. Zak: We certainly learn with time. That's the good side of it. Oh, it feels good when I play nice. It feels good when someone reciprocates and they thank me for being a good citizen. But we also have this negative side, which is important for cooperation too, which is, "Gee, if you don't play nice, I'm going to get pretty hot under the collar. I'm going to let you know about it, and that's going to give you feedback on what the right boundaries are." And as a society, we do that by enacting laws and regulations. We say, "This stuff is OK, but here's the line in which if you cross that line, even if your moral intuition is not kicking in that says this is wrong, as a group we're going to tell you. We're going to say this is a line at which this is inappropriate behavior." And that helps us.

Ms. Tippett: Mm-hmm. And so how do you analyze the character of a person like Bernard Madoff from what you know from neuroscience and neuroeconomics?

Mr. Zak: I haven't done an exhaustive study.

Ms. Tippett: OK.

Mr. Zak: I have read up a lot, so let me put that caveat in place.

Ms. Tippett: Yeah. What does your kind of intuition tell you?

Mr. Zak: I think he's — a couple of things we found in our laboratory studies, which may apply to him. One is we find a lot of early trauma in individuals who are kind of morally ambiguous on their actions. I haven't discovered if he's got an early trauma in his life, death of a parent, you know, bankruptcy of a business, loss of income. So we often see traumatic events in people early in life and they have a much more kind of flexible brain system. They have this more fluid sense of right and wrong than other people do, for one. And number two, I think he was also a very insecure man, liked to be the center of attention. And, boy, it's great when people are coming to you and think you're way above the rest, you're extraordinary and you're giving millions of dollars away to charities. And then he said starting in the early '90s, he just couldn't sustain those returns that he had so he started this kind of Ponzi scheme.

So most of us would just probably take the hit and say, "Hey, you know, returns are down. We're going to try to adjust our strategy." Instead, he felt like he couldn't face up to that, and so it's this sense of not being able to meet the expectations that others have for you and you have for yourself, which generally lies in people who are very insecure and don't have a kind of good sense of self.

Ms. Tippett: So, I mean, I'm assuming he would be one of that 2 percent, you think, you could imagine, in your testing who would not have this normal innate inclination …

Mr. Zak: No, I don't think so.

Ms. Tippett: You don't?

Mr. Zak: The 2 percent are — we find a very strong developmental component, and there's many studies in animals identifying how this happens. I think this is more of an acquired issue.

Ms. Tippett: OK.

Mr. Zak: I think he was under a great deal of stress and this shut the system down.

Ms. Tippett: OK.

Mr. Zak: The 2 percent we find, the system doesn't work from the get-go. In fact, we recently discovered that people with social anxiety disorder have this same dysfunction. They are not getting the feedback that we would get in a social setting that tells us whether our behavior is appropriate or not. So there are some clinical conditions that we're looking at now that are associated with this. So there's this sort of "I'm born with it" 2 percent versus "I'm under stress and I've kind of acquired this" — the guys at Enron, Bernie Madoff.

Ms. Tippett: OK. You know, I want to ask you again — so trust is such an important feature in markets, in morality. Now that that is — that there's been a breach of trust, what does that do — what does that tell you about how people are going to navigate their way through this economic crisis and beyond it?

Mr. Zak: There certainly is a sense of once burned, twice shy, and I think the economy will not begin to start growing until we kind of get over that. And I think the recipe to do that is to start small. You can trust your local merchant who you know, perhaps much more than some giant corporation. So it's kind of starting small and building up that trust. And we've done studies, and other people have, on the mechanism of that and basically it's this getting comfortable with taking risk again.

Ms. Tippett: OK.

Mr. Zak: And risk taking is really important. Risk taking is where advances, where innovations come from, but we have to be kind of willing to do it. And again, once you've been burned and you feel like, "Gee, I've seen my retirement portfolio go down by 30 percent; the last thing I'm going to do is put my foot back in the water."

Ms. Tippett: You know, you said a moment ago that you think a moment like this is a moment to reflect and to be refreshed in a way and to ask some important — to be renewed and to ask some important moral questions — and that's what I'm hearing from many different directions. But I wonder if — I mean, you also have the cold eye of a scientist, and I wonder if your science would suggest that when the economy is moving again, let's assume that things get on to a more stable and prosperous ground again, do those kinds of questions recede or could you imagine a long-term effect of the kind of reflection that's going on now?

Mr. Zak: From the way the brain is organized, I would think that we're going to have — so the brain sort of habituates to environments, and we've habituated now to a kind of a fearful, pessimistic environment. And when we are in a euphoric setting and we're getting double-digit returns every year in the stock market or some other market, I think we also acclimate pretty quickly to that.

Ms. Tippett: Mm-hmm.

Mr. Zak: So I think history will repeat itself.

Ms. Tippett: All right.

Mr. Zak: I think we're not going to learn from this unless we can sit back, unless we take this opportunity to sit back and reflect and make fundamental changes. So for the people who do that, for the people who are looking at that, saying, "Gee, I was selling mortgages to people who had no income at all. Probably not the business I want to be in. Maybe I should use my skills for something else," and/or "I don't need a bigger car than my neighbor. What I really need to do is spend more time with my family or volunteer at a charity once a week." I think those are the kind of fundamental changes that now is the time to do. And if you can set up those habits, then you will see permanent change, but I think this is the time to do it. And if you wait three years from now when the party is back on, the financial party is back on, there will be less incentive to change.

Ms. Tippett: OK.

Mr. Zak: So pain is a great time for growth.

Ms. Tippett: OK.

Mr. Zak: So pain is a great time for growth.

Ms. Tippett: OK.

(Sound bite of music)

Ms. Tippett: Neuroeconomist Paul Zak.

I'm Krista Tippett and this is Speaking of Faith from American Public Media. Today, "A Science of Trust: Economics and Virtue." Paul Zak is trained in economics, neuroimaging, and mathematics, and is based at Claremont Graduate University.

(Sound bite of music)

Ms. Tippett: Virtue, I think, is a word that's important to you. You've talked about virtue as part of economic life. There's some place where you talked about Aristotle taking magnificence — that magnificence is one of the virtues that he cited in life. Talk to me a little bit about how you think about that for yourself.

Mr. Zak: I think magnificence is my favorite virtue of Aristotle's. Wouldn't it be great to say, "You were magnificent today"? I try to do that with the people around me. I try to recognize magnificence when it occurs and let them know how special they are. But I think this is also a time in my own life to focus on things like generosity and compassion and understanding and to use this as a bit of a teaching moment, not only for myself but certainly for my children and those around me, to think about how we can do better, how we can help more, and the value of doing that. And again, when everyone is employed, and we're not talking about people losing their houses and such and such.

Ms. Tippett: Right.

Mr. Zak: For example, we adopted a dog recently that was going to be put down by a family who had lost their home and they had to move, and they had a number of pets. Not a healthy young dog, but an old not-so-great dog. And we sat as a family and said, "We like this dog and we don't want him to be — we don't want the family to have the pain of having to put this dog down. Let's take it in and let's try to help them and let them come and see their dog when they can." So I think, you know, all those little lessons don't always occur when you're buying the bigger house and the bigger car and you don't have to think about it. So I think we have tried, my family and I have tried to explicitly think about how we could reach out more to help others around us.

Ms. Tippett: You know, and I want to ask you if in addition to what is happening in the economy right now, is what you are learning about economics and morality through neuroscience and neuroeconomics, is your research challenging or supporting or possibly changing some of the assumptions about market economies that we've held in this culture in recent years?

Mr. Zak: I think we're of two minds on market economies. I think most of us have our retirement money in stocks and bonds, and so we understand that as the economy grows the stock market goes up in value and we're happy about that. On the other hand, there is this underlying sense that interacting in markets somehow degrades our dignity, is not something we should be doing. It's not our best purpose as human beings, and that thought, which is associated with Marx, for example, predates that, goes back to Aristotle and perhaps before. It's in Confucianism. So I think we are starting to take some shots from that by using this interdisciplinary approach in which we're identifying the legal aspects of an innate sense of morality. We're identifying the economic aspects. We're identifying the religious aspects. So by having this kind of conversion evidence, I think we are taking a shot on economics as bad, sort of a necessary evil.

I think what we're saying is that this is a human endeavor, and humans throughout history have traded with each other, and they trade because it can make both parties better off. And to the extent that I sell you something that you need and helps you, that in fact is a moral act. Even if I'm getting paid for it, it is still a moral act because I have thought about how to make you better off, how to increase your welfare, your happiness. And I think that is a different take. That's not a unique view of the economy, by the way, but it's a view that we haven't heard much about. And so I think if we think about being magnificent as customer service agents, being magnificent as managers, if we think about doing the very best in terms of teamwork to serve those around us, serve the people we work with, serve our employees, then we have a very different view of what the economic endeavor is and why it creates prosperity.

(Sound bite of music)

Ms. Tippett: Neuroeconomist Paul Zak. In addition to magnificence, Aristotle's other virtues include courage, temperance, liberality, magnanimity, pride, good temper, truthfulness, wittiness, friendliness, modesty, and righteous indignation.

(Sound bite of music)

Ms. Tippett: Do you think you live differently because of what you know through your work?

Mr. Zak: What a wonderfully unfair question that is. I do. You know, I've started to realize that I have more control over my own happiness and the happiness of those around me than I thought I did. In fact, none of us are too busy to take care of those around us, and I think in a very real sense our research shows us that we are our brothers' keepers and sisters' keepers. We can't help but be concerned for those around us.

So I'll give you a quick example of that on how this system works. This doesn't happen so much anymore, but it used to be when I was younger that we'd have these kids who fell down some abandoned well somewhere in Texas and it would be a big media event. And presumably, you know, millions of dollars would be spent to get this kid out of the well. And you think, "Well, suppose instead of spending a million dollars to save this child, instead of doing that, let me spend a million dollars and vaccinate every child in West Virginia, Louisiana, and Mississippi against the standard childhood diseases. I probably could save a lot more lives by having an extensive vaccination program, and I'll just take that kid and I'll just cap the well and he'll stop crying after a while and we'll forget about him." Well, come on. No one can do that. We just can't do that. We're not able to do that because we're empathic creatures. Because we feel that cry. We can't ignore it. And that's the system that we're characterizing in our brains. And as long as that system's intact for the most part, I think it keeps us on this fairly virtuous path most of the time for most people. Again, if I stress you enough, I can get you off that path. And that connection is stronger and when it's one to one and in person.

Ms. Tippett: OK.

Mr. Zak: In our experiments, people who are empathically engaged not only gave more money to a stranger in laboratory, they also gave more money to charities when given a chance. And I should say that also in these experiments, they're not the most pleasant experiments. So these individuals are getting paid, you know, we're jabbing their arm with needles and we're putting drugs into them to turn on and off parts of the brain. So they're really getting paid $40 to $50 to endure some pain and sit in the lab for a couple of hours, and yet they still voluntarily choose to give up that money to help a stranger, to help a charity once we've engaged these brain systems regarding empathy. That's pretty amazing to me. And these are hungry college students.

Ms. Tippett: So you're learning about this innate moral inclination. Is there something in your research that also suggests how that can be strengthened? Are you thinking of spraying oxytocin over large urban areas? I mean …

Mr. Zak: Absolutely. Put it in the water supply. So I think it's getting back to this one-on-one relationship. If I see my customer, if I see the people I work with, if I have that personal interaction from a scientific perspective, from a neuroscientific perspective, I'm getting much more feedback on what I'm doing, how it affects people, does it help people, is it appropriate. When I'm doing all this electronically — again, à la Enron, just to pick our favorite nasty company — then everything is easier to kind of ignore the pain you may be causing by behaving inappropriately. So I think it's that one on one. It's the going to the farmers' market. It's understanding that millions and millions of people own Wal-Mart stock, and if Wal-Mart is going to survive, they're going to try to provide the best customer service and products they can. And that's a good thing; that's something that people want. And if you want a different level of product and customer service, then you'll go to a different kind of store. So there's this fine line between economies depending on other regarding behaviors, what we might call virtuous behaviors, and competition. And the competition can sometimes drive us to behave in nonmoral ways, immoral ways. And that's, I think, where we can get out of whack.

(Sound bite of music)

Ms. Tippett: Paul Zak is professor of economics and the founding Director of the Center for Neuroeconomic Studies at Claremont Graduate University in California. He edited the book Moral Markets: The Critical Role of Values in the Economy.

Paul Zak's field of neuroeconomics is young and not uncontroversial, but the importance of human emotion as a force in market economy seems more generally acknowledged in the wake of the recent economic downturn.

George Akerlof and Robert Shiller, two leading economists, co-authored the book Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism. They write,

"Just as families sometimes cohere and at other times argue, are sometimes happy and other times depressed, are sometimes successful and at other times in disarray, so too do whole economies go through good and bad times. The social fabric changes. Our level of trust in one another varies. And our willingness to undertake effort and engage in self-sacrifice is by no means constant."

Akerlof and Shiller continue,

"The idea that economic crises, like the current financial and housing crisis, are mainly caused by changing thought patterns goes against standard economic thinking. But the current crisis bears witness to the role of such changes in thinking. It was caused precisely by our changing confidence, temptations, envy, resentment, and illusions — and especially by changing stories about the nature of the economy. And we know not what is yet to come."

(Sound bite of music)

Ms. Tippett: The book Animal Spirits was recommended to me by American Public Media's chief economics correspondent, Chris Farrell. After producing this program, I sat down with Chris to better understand the place neuroeconomics has in the wider world of economic theory and to ask him what it means to view economic recession as cleansing when it disrupts so many lives. You can watch my conversation with Chris on our Web site,

On another note, for the next few months, through Ramadan, we'd like to invite Muslim listeners to illustrate the complexity and diversity of the Muslim world, as it is often called, with your voices and stories. What do you find beautiful in Islam? What hopes, fears, and questions are on your mind as you ponder the future? Tell us how these things find expression in your daily life and in your religious practice, including the upcoming observance of Ramadan. Find the "Share Your Story" link and much more on our home page,

(Sound bite of music)

Ms. Tippett: The senior producer of Speaking of Faith is Mitch Hanley, with producers Colleen Scheck and Nancy Rosenbaum. Our online editor is Trent Gilliss, with Web producer Andrew Dayton. Kate Moos is the managing producer of Speaking of Faith. And I'm Krista Tippett.

Voices on the Radio

Zak is professor of Economics and director of the Center for Neuroeconomic Studies at Claremont Graduate University in California. He's editor of Moral Markets: The Critical Role of Values in the Economy.