Generalized trust and sustainable coexistence between socially responsible firms and nonprofit organizations

In this paper, we focus on a specific component of economically relevant trust, i.e. on what we call ‘institutionally produced generalized trust’, defined as the amount of widespread trust (which is a public good for the economic system as a whole) endogenously and continuously generated by the interaction of two types of private organizations operating in the economy: for-profit firms and nonprofit organizations. Through an evolutionary model with a trust accumulation equation and two replicator equations (capturing the evolution of economic organizations over time) we show that (1) the fixed point where all the four sub-types of private organizations considered in the model are simultaneously present can be attractive only if ‘virtuous’ for-profits (i.e. socially responsible firms) and ‘virtuous’ nonprofits (i.e. actually trustworthy mission-oriented organizations) generate a negative externality on the other organizations of the same type. (2) The fixed point where the level of trust is very low and no socially responsible firms neither trustworthy organizations are present can be attractive; this social configuration interestingly recalls, to some extent, what some prominent social scientists depict as a trend currently occurring in the United States. (3) A socio-economic scenario where four pure population fixed points are simultaneously attractive exists.