The Economics of Integrity

Morgan O'Rourke


April 1, 2010

book-integrityWhen you pour the milk on your morning Cheerios, do you ever stop to think about just how many people are involved with making sure that milk got safely from the cow to your refrigerator? How about when you make a withdrawal from the ATM? Do you ever consider the complicated path of transactions that need to occur in order to get the cash from your account to your pocket? More than likely, you don't. Yet these transactions, and many like them, require us to trust that complex networks of people will perform their jobs responsibly so that we can have milk that won't make us sick and crisp $20 bills on demand.

In order to be successful, these systems are dependent on one simple, but often overlooked quality: integrity. It is the assumption that lies at the foundation of our entire economy. Without trust we would have no incentive to conduct business with anyone-there would be no assurance that any product or service would be worth buying. Unfortunately, as the financial crisis has shown, too many financial firms were out for themselves and, in their haste to chase profits, lost sight of the fact that it was the trust of their customers that made them successful in the first place.

The Economics of Integrity is Anna Bernasek's simple, straight-forward effort to remind us of the value of integrity and point out that the more we invest in this virtue, the more prosperity we can enjoy. Basically, refocusing on integrity is a way back from the brink of economic disaster. In order to further underline the value of integrity, Bernasek turns to paragons of industry to demonstrate how integrity has contributed to their success. Ironically, as the book's subtitle suggests, one of these companies is Toyota, whose well-publicized problems occurred after the book was written. But rather than contradict Bernasek's thesis, Toyota's fall actually helps strengthen her argument by showing that when trust is lost, even companies with the best reputations can quickly find themselves struggling to stay afloat.

Morgan O’Rourke is editor in chief of Risk Management and director of publications for the Risk & Insurance Management Society, Inc. (RIMS)