The need for clarity on social capital

I first remember seeing this paper over on Anti-dismal here.  I wanted to mention it over here as well, but forgot!  But then Vox-EU came up with a summary as well.

Social capital is associated with a host of desirable outcomes:

  • There is more trust and there are more blood donations in towns with lots of civic associations.
  • Voter turnout is higher, and financial markets work better (Guiso, Sapienza, and Zingales 2008).

A growing literature has pointed out that social capital can also have a ‘dark side’ (Field 2003):

  • The Ku Klux Klan, drug-dealers and the mafia rely on social cohesion to ensure co-operation.
  • Also, important recent work shows that civic associations can lead to the entrenchment of existing leaders, undermining the quality of governance (Acemoglu, Reed, and Robinson 2013).

Recently when I reviewed “the Spirit Level” I specifically called it out for its cursory treatment of status goods – and what exactly they are and how society behaves with them.  Then when I wrote up this article on inequality (with extra comment on TVHE) I stated:

And of course the elephant in the room is how government policy choices have an impact on trust and co-operation. What drives these matters, and would a society that tries to more closely control means of production and income actually create greater trust and social cohesion?

Often in public debate at present it is “taken as given” that social capital and the behaviour associated with “in group behaviour” is always a good.  I was uncomfortable with this – and the VOX-EU post articulates the concept with evidence better than I could!

Social capital has many elements, and it includes the idea of using heuristics of action and ideas that are used for making choice.  Defining such things as ‘inherently good’ doesn’t seem to fit into any consequentialist frame of moral worth, and trying to make it a universal good in this sense appears inappropriate.

Now I am NOT saying that economists “know” this and other disciplines don’t – as that is a pile of horse doo doos.  In the Spirit Level book (and I note it in my review), sociologists paint this as a concern.  Furthermore, I wasn’t taught these ideas while studying economics – I specifically remember talking about this sort of social capital and in group behaviour as a “bad” thing in the race and racism course I did in the Victoria University History school.

Yes co-operation and communication in society are a great thing – but there is no magic “silver bullet” like cutting inequality that does this.  And furthermore, this co-operation should NOT be at the expense of groups we decide to define as “others”.  The purpose of government, sentience, and civilised society is to move us past ‘prisoner’s dilemmas‘ that involve describing and fighting other groups – not to reinforce them!!!

Note:  I realise in saying all this, I’m wandering into a minefield of moral arguments that I’m probably failing on – in which case I would enjoy being appropriately torn apart.  I would just note that many of the people making relatively steep arguments about the moral value of “social capital” are on ground that is at least as shaky 😉

8 replies
  1. Daniel J. Taylor
    Daniel J. Taylor says:

    Ai, fields like sociology have been aguing the merits of good v bad social capital for as long as I can remember. Obviously, it depend’s on how one is framing “social capital”, its scope and limitations, and how it is being measured (assuming it indeed can). All too often it seems we have people arguing over quite different concepts which are being framed (within the argument) as being one in the same. I guess what I’m trying to say is… “good luck” searching for clarity. Social Capital is on hell of clusterf*** of a social theory 😉

    • Matt Nolan
      Matt Nolan says:

      Indeed – it is more the point that, if you want to “set policy on the basis of it”, make sure what you are assuming is clear and consistent.

      My problem is that people are using “social capital” to justify whatever they want – rather than recognising that the concept is as old as the hills, and is a massive clusterf*** 😉

      Hearing people talk about status goods as if it is a new idea, rather than being from the institutional schools of the 19th century, or even older Marxists (although I never found their conception as clear as Veblen), really indicates people are being a bit cheeky.

  2. Seamus Hogan
    Seamus Hogan says:

    My problem with social capital is that I don’t understand the metaphor. Capital is a stock that is accumulated by forgoing consumption and that, in return, provides an ongoing flow of benefits. I may be missing something, but I can’t see the corresponding notion to investment and stocks versus flows in social capital. This is not to say that things like trust and cooperation are not important components of the success of an economic system, but it seems like the origin of the term is something like the following: Economists talk about physical capital and human capital and they are good things. But trust and cooperation are also good things so lets use the word “capital” to describe them as well.

    • Matt Nolan
      Matt Nolan says:

      Good point – I am sure a lot of people just use the term, which is disappointing.

      The context I see it in is one of reputation, and the accumulation of “trust” in so far as it can be costly to verify statements so trust leads to people using a heuristic where they just believe you (reputation again!). This is, of course, a concept that is already used extensively within economics – both micro and macro.

      In this context I’d see co-operation as a result of other things – rather than a product of.

      And having people build up these heuristics does not seem like an easy thing to analyse, or a “self-evidently good” thing either. I had thought this point was obvious for a long time, and then I read the Spirit Level 😉

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  1. […] Matt, the topic of Social Capital (SC) was recently raised, with some emphasis placed on recognising its oft-ignored “dark side”. […]

  2. […] So thinking about what this inequality means, and some of the frameworks we may use to justify concern about it, […]

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