Recently, driving to work, I was smashed from behind by a huge sport utility vehicle. As it happens, our bumpers mismatched; while my bumper was unscathed, I had some serious damage to my trunk.
So on to the body shop. But where? It would be a one-time dealing; would I be assured quality work? Every shop promises so much, so how might I get some advance assurance the shop would keep its promise? How might I develop enough trust to drop my car off at a particular place? From frequent dealings, the auto insurance company paying my repairs recommended some trustworthy shops. So I picked one. (And so far, so good.)
We often find ourselves seeking some degree of advance assurance about buying some product or service. (Indeed, many times we do so unconsciously.) In this instance, I used an intermediary, which had enough experience and financial incentive to know a few good shops.
And, fortunately, consumer demand for assurance about quality and safety produces a wide variety of practices, both formal and informal, that provide grounds for consumer trust. If its not the network of advice from neighbors and friends about the good shops or brands, its the brands themselves, which come to represent a standard of quality, or the association a shop or service has with other organizations, or a seal of approval which provides a signal that the implicit promises of quality and safety will be kept.
Santa Clara University economist Daniel B. Klein has been exploring this spontaneous and necessary feature of the marketplace in recent works, including his book Reputation: Studies in the Voluntary Elicitation of Good Conduct (University of Michigan Press, 1997) and in a recent issue of The Independent Review (Independent Institute, Oakland, Calif.). As Klein explains, "the avenues to trustworthy dealings are multitudinous and open ended." He offers some examples, which frequently go unappreciated, but help to assure us in our daily decisions:
- Product displays, sales assistance, labeling and packaging information, try-out periods, even word-of-mouth advice serve to investigate and demonstrate the characteristics of goods and services.
- Warranties, return policies, security deposits, collateral, hope for future dealings, provide for the "truster" -- the consumer -- an advantage held until the end of the relationship.
- Brand names, advertising, dealers, insurance companies, retailers, various middlemen foster repeat or extended dealings.
- Hired inspectors, second opinions, product testing publications, consumer credit bureaus, restaurant and movie reviews, doctors, lawyers, hotel concierges, friends, neighbors, co-workers are essentially "knower" services, supported by consumers.
- Underwriters Laboratories, universities, medical schools, Moodys Investor Service, auditors, the Better Business Bureau, referral services, letters of recommendation, friends, neighbors are knower services supported by "promisors" -- the businesses.
- Advertising, voluntary accreditation and certification, brand-name promotion, long-term investments in equipment, etc., signal quality by making visible investments that would be profitable only for a high-quality products.
As these examples suggest, we have many ways to be assured about the choices we make -- and the option, almost always, to choose wisely. "The actual institutional forms that such aids can take are far more numerous that we . . . can ever hope to know and sometimes refined to the point of remarkable efficiency," Klein writes. "If, after all, you cannot come to trust Mr. Dealer, then dont! Look for someone else who gives better grounds for trust."
In most instances, we also can rest assured that the indicators of safety or quality will keep their promises. For example, the ongoing successes of an Underwriters Laboratories or other private certification firm requires a reputation for integrity and vigilance that certification isnt misused. Similarly, if the American Automobile Association turned people over to many unscrupulous mechanics, its reputation would diminish its assurance value. My insurer doesnt want to recommend shoddy body shops , either.
Moreover, we have, in the free flow of information through the news media, as well as business efforts such as the advertising division of the Better Business Bureau, many ways unscrupulous businesses and practices get the exposure they deserve.
All of which underscores the superior ability of the marketplace over governmental efforts to root out the rascally "untrustworthy promisor." As Klein explains: "A vote for coercive government measures must rest on the belief that this rascal cannot be adequately foiled by the open-ended, voluntary processes generated by resourceful middlemen, qualified knowers, trustworthy promisors, and wary consumers who purposively seek pointed knowledge."