Social trust manifests in all sorts of ways, and it's often amorphous and difficult to measure. We sense its presence or absence, but exactly what is it? Is it our trust in strangers, or our trust in institutions, or a warm and fuzzy feeling that our society isn't falling apart?

In several critical ways, social trust isn't warm and fuzzy, it's all about the money, honey. In high-trust societies, transactions are frictionless and low-cost. In low-trust societies, transactions must go through multiple levels of verification, trusted third-parties, etc., each of which is costly.

Correspondent Bruce H. illuminates the differences between high-trust and low-trust transactions:

"There must be a high degree of social trust in order to make business transactions. If you think the other person is likely to take the goods and not pay, you are not likely to engage as freely, and the "shadow work" of ensuring that a transaction is honored drains the economy.

In cultures where cunning and deception are seen as laudable, business transactions are slow, proceeding only carefully, in a time-consuming way because both parties have to ensure the other's compliance at every phase of the arrangement. This is costly.

In cultures where personal honor take primacy, a quick handshake is sufficient and work can begin immediately, confident that payment or the exchange will proceed to both parties benefit.

That, in essence, is what my father told me about his experience of doing business around the world.

There are places where you just discuss what is needed and agree on a price shake hands and write it down, there are places where you make sure the paperwork is in order and signed before you work, there are places where you make sure they have the money they claim they have and do all the paperwork and get some up front, and there are places where you make sure the money is in the hands of some secure third party (which, of course costs money) before you sign any agreements.