The need for clarity on social capital

By Matt Nolan 08/08/2013


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 ;)