Of the things that determine a community’s level of wellbeing, possibly the most important is social capital. The more involved individuals are in voluntary networks, and the more trust people have for others, the more productive, and happier they and their community are apt to be.

In many parts of the world people distrust others in their village or city, except for close kin. In order to prevent cheating, owners limit the size of their businesses to those that can be run by relatives. The interior courtyards of their homes might be immaculate, but their blank exterior walls face trash-lined streets. Since people don’t trust their neighbors, it is difficult for them to buy on credit, and almost impossible to cooperate with their neighbors on projects that would benefit all in the long term.

Bozeman has natural beauty and an attractive climate, but I find the best aspect of the community is not its natural resources and amenities, but its people. The basic honesty and friendliness of almost all I meet also permeates local small business. Storeowners and their employees strive to please, and wouldn’t think of charging for services that require trivial effort. They trust me, and I trust them.

With a high level of social trust, Bozeman is spared much of the expense and social isolation that other cities suffer as a result of crime, congestion, and plain lack of concern for others. Entrepreneurs find Bozeman a fertile place to start businesses. That’s due partly to broadband and improved transportation, but more to the trust that attracts talented people and leads entrepreneurs and employees to work together with honest effort and consideration.

I mentioned earlier villages where people trust only immediate family. Sad to say, America is developing a similar problem, on a much larger economic scale, that poses some threat to our prosperity and liberty.

Free market commentators are apt to place little faith in government, and the public agrees. According to a Gallup poll in late 2008, only 12 percent of the public had very high, or high, faith in the honesty and ethical standards of members of Congress. However, the percentage of the public that had high esteem for business executives was exactly the same. While 40 percent of the public rated members of Congress as “average,” only a slightly better 49 percent had middling regard for the honesty and ethics of business leaders.

These numbers are important because, in a free society, we depend on business leaders to coordinate complex and large-scale voluntary dealings among individuals. If people regard private business as serving their needs, they feel little inclined to give government officials more power over things like health care, financial services, and energy production. Conversely, disquiet about business leads to support for, or acquiescence in, expansion of government despite popular qualms.

I’m referring here not to much-discussed environment crises or corporate crimes, but rather to the everyday conduct of some companies, sapping individuals’ faith in business as an alternative to government.

The voicemail greeting that has become a national joke epitomizes the problem: “All of our representatives are busy helping other customers, but stay on the line because your call is very important to us.” I sometimes wonder, while waiting on hold for ten or fifteen minutes, what these companies hope to gain. These lies are trivial, but they are obvious and gratuitous, and their very pervasiveness makes people less inclined to trust business where the stakes are higher and detection is more difficult.

Hospitals and medical clinics send indecipherable bills, and routinely give insurance companies fifty percent adjustments. They demand the full list price primarily from moderate-income people without insurance. Many of these institutions get large tax advantages as “charitable” organizations. Airlines trumpet low fares, but give less assistance to stranded passengers. Endless voicemail trees and impenetrable bureaucracies make it maddening to get errors corrected. Some businesses, such as cell phone providers, have rate structures that impose punitive charges on those who stray over the limits of their packages.

In many cases, of course, people are careless and don’t make reasonable efforts to learn and comply with the terms of their agreements. In many others, however, companies count on substantial profit from pouncing on lapses. Even conscientious customers don’t have the skill or the time to study the fine print and probe ambiguities in airline tariffs, insurance policies, credit card contracts, and the like. All of this benefits offenders, but imposes costs on the business community as a whole. For instance, we throw away many offers that could be attractive because it’s not worth studying the fine print to find the few without a catch. Lack of trust in strangers leads people to deal with businesses that have been satisfactory earlier, even though prices might be higher.

Eventually, developing reputations for poor service hurt even large companies in most instances. But executives whose incentives are keyed to short-term performance may well have moved on. Customers are hurt in the short run, and shareholders in the long run. The market ultimately works, and government would not have done better. But some businesses seem to nurture a contrary impression in the public.

In Bozeman, social trust is an important form of capital. While we rightly trumpet the “rule of law” as important to a free and productive society, people go to court only in rare situations. Most of the time, we rely on social norms—the belief that those with whom we deal will do the right thing—to facilitate relationships and transactions.

When people believe that corporations do not share their social norms, they pull back from doing business and become cynical. We become poorer as a result. People also are more apt to place their faith in government, where it is apt to be abused in ways that often are different, but which are more destructive of individual liberty.