The Optimal Level of Trust

How much we trust people influences much more than just our interpersonal relationships and can even cost us a considerable amount of financial harm.

The study concluding this (pdf) suggests that too much or too little trust has a financial cost equivalent to that of not attending university and shows that if we trust too much we assume too much social risk, but trust too little and we give up potentially profitable opportunities:

Highly trustworthy individuals think others are like them and tend to form beliefs that are too optimistic, causing them to assume too much social risk, to be cheated more often and ultimately perform less well than those who happen to have a trustworthiness level close to the mean of the population. On the other hand, the low-trustworthiness types form beliefs that are too conservative and thereby avoid being cheated, but give up profitable opportunities too often and, consequently, under-perform. Our estimates imply that the cost of either excessive or too little trust is comparable to the income lost by foregoing college. Furthermore, we find that people who trust more are cheated more often by banks as well as when purchasing goods second hand, when relying on the services of a plumber or a mechanic and when buying food.

via Tim Harford