The Great Divideis a series about inequality.

In America today, we are sometimes made to feel that it is naïve to be preoccupied with trust. Our songs advise against it, our TV shows tell stories showing its futility, and incessant reports of financial scandal remind us we’d be fools to give it to our bankers.

That last point may be true, but that doesn’t mean we should stop striving for a bit more trust in our society and our economy. Trust is what makes contracts, plans and everyday transactions possible; it facilitates the democratic process, from voting to law creation, and is necessary for social stability. It is essential for our lives. It is trust, more than money, that makes the world go round.

We do not measure trust in our national income accounts, but investments in trust are no less important than those in human capital or machines.

Unfortunately, however, trust is becoming yet another casualty of our country’s staggering inequality: As the gap between Americans widens, the bonds that hold society together weaken. So, too, as more and more people lose faith in a system that seems inexorably stacked against them, and the 1 percent ascend to ever more distant heights, this vital element of our institutions and our way of life is eroding.

The undervaluing of trust has its roots in our most popular economic traditions. Adam Smith argued forcefully that we would do better to trust in the pursuit of self-interest than in the good intentions of those who pursue the general interest. If everyone looked out for just himself, we would reach an equilibrium that was not just comfortable but also productive, in which the economy was fully efficient. To the morally uninspired, it’s an appealing idea: selfishness as the ultimate form of selflessness. (Elsewhere, in particular in his “Theory of Moral Sentiments,” Smith took a much more balanced view, though most of his latter-day adherents have not followed suit.)

But events — and economic research — over the past 30 years have shown not only that we cannot rely on self-interest, but also that no economy, not even a modern, market-based economy like America’s, can function well without a modicum of trust — and that unmitigated selfishness inevitably diminishes trust.

Javier Ja�n

Take banking, the industry that spawned the crisis that has cost us dearly.

That industry in particular had long been based on trust. You put your money into the bank, trusting that when you wanted to take it out in the future, it would be there. This is not to say that bankers never tried to deceive one another or their clients. But a vast majority of their business was conducted on the basis of assumed mutual accountability, sufficient levels of transparency, and a sense of responsibility. At their best, banks were stalwart community institutions that made judicious loans to promising small businesses and prospective homeowners.

In the years leading up to the crisis, though, our traditional bankers changed drastically, aggressively branching out into other activities, including those historically associated with investment banking. Trust went out the window. Commercial lenders hard-sold mortgages to families who couldn’t afford them, using false assurances. They could comfort themselves with the idea that no matter how much they exploited their customers and how much risk they had undertaken, new “insurance” products — derivatives and other chicanery — insulated their banks from the consequences. If any of them thought about the social implications of their activities, whether it was predatory lending, abusive credit card practices, or market manipulation, they might have taken comfort that, in accordance with Adam Smith’s dictum, their swelling bank accounts implied that they must be boosting social welfare.

Of course, we now know this was all a mirage. Things didn’t turn out well for our economy or our society. As millions lost their homes during and after the crisis, median wealth declined nearly 40 percentin three years. Banks would have done badly, too, were it not for the Bush-Obama mega-bailouts.

This cascade of trust destruction was unrelenting. One of the reasons that the bubble’s bursting in 2007 led to such an enormous crisis was that no bank could trust another. Each bank knew the shenanigans it had been engaged in — the movement of liabilities off its balance sheets, the predatory and reckless lending — and so knew that it could not trust any other bank. Interbank lending froze, and the financial system came to the verge of collapse, saved only by the resolute action of the public, whose trust had been the most abused of all.

There had been earlier episodes when the financial sector showed how fragile trust was. Most notable was the crash of 1929, which prompted new laws to stop the worst abuses, from fraud to market manipulation. We trusted regulators to enforce the law, and we trusted the banks to obey the law: The government couldn’t be everywhere, but banks would at least be kept in line by fearing the consequences of bad behavior.

Decades later, however, bankers used their political influence to eviscerate regulations and install regulators who didn’t believe in them. Officials and academics assured lawmakers and the public that banks could self-regulate.

But it all turned out to be a scam. We had created a system of rewards that encouraged shortsighted behavior and excessive risk-taking. In fact, we had entered an era in which moral values were given short shrift and trust itself was discounted.

THE banking industry is only one example of what amounts to a broad agenda, promoted by some politicians and theoreticians on the right, to undermine the role of trust in our economy. This movement promotes policies based on the view that trust should never be relied on as motivation, for any kind of behavior, in any context. Incentives, in this scheme, are all that matter.

So C.E.O.’s must be given stock options to induce them to work hard. I find this puzzling: If a firm pays someone $10 million to run a company, he should give his all to ensure its success. He shouldn’t do so only if he is promised a big chunk of any increase in the company’s stock market value, even if the increase is only a result of a bubble created by the Fed’s low interest rates.

Similarly, teachers must be given incentive pay to induce them to exert themselves. But teachers already work hard for low wages because they are dedicated to improving the lives of their students. Do we really believe that giving them $50 more, or even $500 more, as incentive pay will induce them to work harder? What we should do is increase teacher salaries generally because we recognize the value of their contributions and trust in their professionalism. According to the advocates of an incentive-based culture, though, this would be akin to giving something for nothing.

In practice, the right’s narrow focus on incentives has proved inimical to long-term thinking and so rife with opportunities for greed that it was bound to promote distrust, both in society and within companies. Bank managers and corporate executives search out creative accounting devices to make their enterprises look good in the short run, even if their long-run prospects are compromised.

Of course, incentives are an important component of human behavior. But the incentive movement has made them into a sort of religion, blind to all the other factors — social ties, moral impulses, compassion — that influence our conduct.

This is not just a coldhearted vision of human nature. It is also implausible. It is simply impossible to pay for trust every time it is required. Without trust, life would be absurdly expensive; good information would be nearly unobtainable; fraud would be even more rampant than it is; and transaction and litigation costs would soar. Our society would be as frozen as the banks were when their years of dishonesty came to a head and the crisis broke in 2007.

AMERICA faces another formidable hurdle if it wants to restore a climate of trust: our out-of-control inequality. Not only did the actions of the bankers and government policies influenced by the right directly undermine trust, both contributed greatly to this inequality.

When 1 percent of the population takes home more than 22 percent of the country’s income — and 95 percent of the increase in income in the post-crisis recovery — some pretty basic things are at stake. Reasonable people, even those ignorant of the maze of unfair policies that created this reality, can look at this absurd distribution and be pretty certain that the game is rigged.

But for our economy and society to function, participants must trust that the system is reasonably fair. Trust between individuals is usually reciprocal. But if I think that you are cheating me, it is more likely that I will retaliate, and try to cheat you. (These notions have been well developed in a branch of economics called the “theory of repeated games.”) When Americans see a tax system that taxes the wealthiest at a fraction of what they pay, they feel that they are fools to play along. All the more so when the wealthiest are able to move profits off shore. The fact that this can be done without breaking the law simply shows Americans that the financial and legal systems are designed by and for the rich.

As the trust deficit persists, a deeper rot takes hold: Attitudes and norms begin to change. When no one is trustworthy, it will be only fools who trust. The concept of fairness itself is eroded. A study published last year by the National Academy of Sciences suggests that the upper classes are more likely to engage in what has traditionally been considered unethical behavior. Perhaps this is the only way for some to reconcile their worldview with their outlandish financial success, often achieved through actions that reveal a kind of moral deprivation.

It’s hard to know just how far we’ve gone down the path toward complete trust disintegration, but the evidence is not encouraging.

Economic inequality, political inequality, and an inequality-promoting legal system all mutually reinforce one another. We get a legal system that provides privileges to the rich and powerful. Occasionally, individual egregious behavior is punished (Bernard L. Madoff comes to mind); but none of those who headed our mighty banks are held accountable.

As always, it is the poor and the unconnected who suffer most from this, and who are the most repeatedly deceived. Nowhere was this more evident than in the foreclosure crisis. The subprime mortgage hawkers, putting themselves forward as experts in finance, assured unqualified borrowers that repayment would be no problem. Later millions would lose their homes. The banks figured out how to get court affidavits signed by the thousands (in what came to be calledrobo-signing), certifying that they had examined their records and that these particular individuals owed money — and so should bebooted out of their homes. The banks were lying on a grand scale, but they knew that if they didn’t get caught, they would walk off with huge profits, their officials’ pockets stuffed with bonuses. And if they did get caught, their shareholders would be left paying the tab. The ordinary homeowner simply didn’t have the resources to fight them. It was just one example among many in the wake of the crisis where banks were seemingly immune to the rule of law.

I’ve written about many dimensions of inequality in our society — inequality of wealth, of income, of access to education and health, of opportunity. But perhaps even more than opportunity, Americans cherish equality before the law. Here, inequality has infected the heart of our ideals.

I suspect there is only one way to really get trust back. We need to pass strong regulations, embodying norms of good behavior, and appoint bold regulators to enforce them. We did just that after the roaring ’20s crashed; our efforts since 2007 have been sputtering and incomplete. Firms also need to do better than skirt the edges of regulations. We need higher norms for what constitutes acceptable behavior, like those embodied in the United Nations’ Guiding Principles on Business and Human Rights. But we also need regulations to enforce these norms — a new version of trust but verify. No rules will be strong enough to prevent every abuse, yet good, strong regulations can stop the worst of it.

Strong values enable us to live in harmony with one another. Without trust, there can be no harmony, nor can there be a strong economy. Inequality in America is degrading our trust. For our own sake, and for the sake of future generations, it’s time to start rebuilding it. That this even requires pointing out shows how far we have to go.

A version of this article appears in print on 12/22/2013, on page SR4 of the NewYork edition with the headline: In No One We Trust.