write one page summery

Social capital refers to the institutions, relationships, and norms that shape the quality and quantity of a society's social interactions. Increasing evidence shows that social cohesion is critical for societies to prosper economically and for development to be sustainable. Social capital is not just the sum of the institutions which underpin a society – it is the glue that holds them together.

Some key concepts are elaborated below:

Horizontal Associations

A narrow view of social capital regards it as a set of horizontal associations between people, consisting of social networks and associated norms that have an effect on community productivity and well-being. Social networks can increase productivity by reducing the costs of doing business. Social capital facilitates coordination and cooperation.

Social capital refers to the institutions, relationships, and norms that shape the quality and quantity of a society's social interactions. Increasing evidence shows that social cohesion is critical for societies to prosper economically and for development to be sustainable. Social capital is not just the sum of the institutions which underpin a society – it is the glue that holds them together.

Some key concepts are elaborated below:

Horizontal Associations

A narrow view of social capital regards it as a set of horizontal associations between people, consisting of social networks and associated norms that have an effect on community productivity and well-being. Social networks can increase productivity by reducing the costs of doing business. Social capital facilitates coordination and cooperation.

Social capital also has an important "downside" (Portes and Landholt 1996): communities, groups or networks which are isolated, parochial, or working at cross-purposes to society's collective interests (e.g. drug cartels, corruption rackets) can actually hinder economic and social development.

Vertical and Horizontal Associations

A broader understanding of social capital accounts for both the positive and negative aspects by including vertical as well as horizontal associations between people, and includes behavior within and among organizations, such as firms. This view recognizes that horizontal ties are needed to give communities a sense of identity and common purpose, but also stresses that without "bridging" ties that transcend various social divides (e.g. religion, ethnicity, socio-economic status), horizontal ties can become a basis for the pursuit of narrow interests, and can actively preclude access to information and material resources that would otherwise be of great assistance to the community (e.g. tips about job vacancies, access to credit).

Enabling Social and Political Environment

The broadest and most encompassing view of social capital includes the social and political environment that shapes social structure and enables norms to develop. This analysis extends the importance of social capital to the most formalized institutional relationships and structures, such as government, the political regime, the rule of law, the court system, and civil and political liberties. This view not only accounts for the virtues and vices of social capital, and the importance of forging ties within and across communities, but recognizes that the capacity of various social groups to act in their interest depends crucially on the support (or lack thereof) that they receive from the state as well as the private sector. Similarly, the state depends on social stability and widespread popular support. In short, economic and social development thrives when representatives of the state, the corporate sector, and civil society create forums in and through which they can identify and pursue common goals.

How is Social Capital Measured?

Social capital has been measured in a number of innovative ways, though for a number of reasons obtaining a single "true" measure is probably not possible, or perhaps even desirable. First, the most comprehensive definitions of social capital are multidimensional, incorporating different levels and units of analysis. Second, any attempt to measure the properties of inherently ambiguous concepts such as "community", "network" and "organization" is correspondingly problematic. Third, few long-standing surveys were designed to measure "social capital", leaving contemporary researchers to compile indexes from a range of approximate items, such as measures of trust in government, voting trends, memberships in civic organizations, hours spent volunteering. New surveys currently being tested will hopefully produce more direct and accurate indicators.

Measuring social capital may be difficult, but it is not impossible, and several excellent studies have identified useful proxies for social capital, using different types and combinations of qualitative, comparative and quantitative research methodologies.

Quantitative Studies

Knack and Keefer (1997) use indicators of trust and civic norms from the World Values Survey for a sample of 29 market economies. They use these measures as proxies for the strength of civic associations in order to test two different propositions on the effects of social capital on economic growth, the "Olson effects" (associations stifle growth through rent-seeking) and "Putnam effects" (associations facilitate growth by increasing trust). (Inglehart (1997) has done the most extensive work on the implications of the WVS’s results for general theories of modernization and development.)

Narayan and Pritchett (1997) construct a measure of social capital in rural Tanzania, using data from the Tanzania Social Capital and Poverty Survey (SCPS). This large-scale survey asked individuals about the extent and characteristics of their associational activity, and their trust in various institutions and individuals. They match this measure of social capital with data on household income in the same villages (both from the SCPS and from an earlier household survey, the Human Resources Development Survey). They find that village-level social capital raises household incomes.

Temple and Johnson (1998), extending the earlier work of Adelman and Morris (1967), use ethnic diversity, social mobility, and the prevalence of telephone services in several sub-Saharan African countries as proxies for the density of social networks. They combine several related items into an index of "social capability", and show that this can explain significant amounts of variation in national economic growth rates.

Comparative Studies

In his research comparing north and south Italy, Putnam (1993) examines social capital in terms of the degree of civic involvement, as measured by voter turnout, newspaper readership, membership in choral societies and football clubs, and confidence in public institutions. Northern Italy, where all these indicators are higher, shows significantly improved rates of governance, institutional performance, and development when other orthodox factors were controlled for. His recent work on the United States (Putnam 1995, 1998) uses a similar approach, combining data from both academic and commercial sources to show a persistent long-term decline in America’s stock of social capital. Putnam validates data from various sources against the findings of the General Social Survey, widely recognized as one of the most reliable surveys of American social life.

Portes (1995) and Light and Karageorgis (1994) examine the economic well-being of different immigrant communities to the United States. They show that certain groups (e.g. Koreans in Los Angeles, Chinese in San Francisco) do better than others (e.g. Mexicans in San Diego, Dominicans in New York) because of the social structure of the communities into which new immigrants arrive. Successful communities are able to offer new arrivals help with securing informal sources of credit, insurance, child support, English language training, and job referrals. Less successful communities display a short-term commitment to their host country, and are less able to provide their members with important services.

Massey and Espinosa (1997) examine Mexican immigration to the US. They show that policies such as NAFTA, which advocate the free flow of goods and services across national borders, also increase the flow of people, since goods and services are produced, distributed, and consumed by people. Using survey and interview data, they show that a theory of social capital is a far better predictor of where people will migrate, in what numbers, and for what reasons, than are neo-classical and human capital theories. These results are then used as the basis for proposing a number of innovative policy measures designed to produce a fairer and more effective management of Mexican immigration to the US.

Qualitative Studies

Portes and Sensenbrenner (1993) examine what happens to immigrant communities when some of their members succeed economically, and wish to leave the community. Their interviews reveal the pressures that strong community ties can place on members; so strong are these ties that some members have Anglicized their names to free themselves of the obligations associated with community membership. Gold (1995) provides evidence that Jewish communities in Los Angeles manage to maintain both the integrity of their community structure and participate more fully in mainstream economic life.

Fernandez-Kelley (1996) interviewed and observed young girls in urban ghetto communities in Baltimore, and discovered that normative pressures to leave school, have a baby while still a teenager, and reject formal employment were very powerful. Surrounded on a daily basis by violence, unemployment, and drug addicts, the girls’ only way of establishing their identity and status was through their bodies. Anderson (1995) studied the role of "old heads," long-term elderly members of the poor urban African-American community, as sources of social capital. "Old heads" once provided wisdom and guidance to the young, but their advice and input today is being increasingly ignored as respect for the elderly declines, and as the community continues to fragment economically.

Heller (1996) examines the case of the south Indian state of Kerala, where literacy rates, longevity, and infant mortality rates have long been the most favorable on the sub-continent. Tracing the history of state-society relations in Kerala, Heller shows how the state has played a crucial role in bringing about these results, by creating the conditions that enabled subordinate social groups to organize in their collective interest. However, the state in Kerala has also been hostile to foreign investment and the maintenance of infrastructure, which has made it difficult for a healthy and well-educated population to transfer its human capital into greater economic prosperity.

Measurement Tools

Led by a growing body of evidence which shows social capital as a potential contributor to poverty reduction and sustainable development, increasing efforts are being made to identify methods and tools relevant to social capital.

Challenges

This is especially challenging because social capital is comprised of concepts such as "trust", "community" and "networks" which are difficult to quantify. The challenge is increased when one considers that the quest is to measure not just the quantity but also the quality of social capital on a variety of scales.

Social capital researchers aim to identify methods and tools which can quantify and qualify social capital to inform policymakers and stakeholders to enable them to impact existing and create new social capital which could benefit poor people and nations.

Few long-standing surveys were designed to measure "social capital", leaving researchers to compile indexes from a range of approximate items, such as measures of trust in government, voting trends, memberships in civic organizations, hours spent volunteering. Surveys currently being tested will hopefully produce more direct and accurate indicators.

Methods

Measuring social capital may be difficult, but it is not impossible, and several excellent studies have identified useful proxies for social capital, using different types and combinations of qualitative, comparative and quantitative research methodologies. (Woolcock and Narayan, 2000)

How we measure social capital depends on how we define it. The most comprehensive definitions of social capital are multidimensional, incorporating different levels and units of analysis. Trust, civic engagement, and community involvement are generally seen as ways to measure social capital. Depending on the definition of social capital and the context, some indicators may be more appropriate than others.

Once it has been decided which how social capital is to be measured, for example by measuring civic engagement through household surveys, cultural factors may be taken into account in designing the survey instrument. Newspaper readership may be a better indicator of civic engagement in Italy (Putnam 1993) than in India because of the varying literacy rates.

Measuring social capital among the poor, particularly studying the same households over time, is difficult because the poor are often involved in informal work, may not have a long-term address or may move. Ironically, the people who move may be the ones who have social connections.

The surveys must be designed so that the potential respondents do not feel stigmatized. The poor may be particularly skeptical to be open if the interviewers are associated with a government agency whom they do not trust.

Examples

World Values Survey  has measured interpersonal trust in 22 countries by asking questions such as: ‘Generally speaking, would you say that most people can be trusted or that you can’t be too careful in dealing with people? (Knack and Keefer 1997)

The Social Capital Initiative at the World Bank is currently funding 10 social capital projects which will help define and measure social capital, its evolution and its impact.

"The proposed analytical methods cover a wide range of qualitative and quantitative approaches. These include quantitative methods in formal research designs with use of control groups, econometric analyses calling on instrumental variables and principal component approaches, as well as case studies, qualitative and inductive methods. A variety of approaches was a priority of the project selection process; it should help determine further the relative aptitude of different approaches at apprehending the nature and the determinants of social capital." (Social Capital Initiative Working Paper No.1, The World Bank, April 1998)

Bowling together

OECD Observer

Social science research and international organisations are awash with jargon that many non-specialists find either confusing or unhelpful. Can this be said of the notion of social capital? According to Robert D. Putnam, Peter and Isabel Malkin Professor of Public Policy at the JFK School of Government at Harvard, and author of the influential book, Bowling Alone, social capital is an idea whose time has come.

Indeed, a decade ago, there was only one research article every three years written worldwide about it; last year alone, there were 300. What exactly is social capital and how can it help policy-makers? Dr Putnam found time between international conferences and transcontinental airports to tell us.

Dr Putnam, what exactly is social capital?

As would be true of any new concept whose use has exploded exponentially in a short space of time, people use the term in a variety of ways. But I would insist on a lean and mean definition: social capital refers to social networks and the associated norms of reciprocity.

©David Rooney

The core idea is very simple: Social networks have value. They have value to people in the networks – “networking” is demonstrably a good career strategy, for example. But they also have “externalities,” that is, effects on bystanders. Dense social networks – barbecues or dinner parties or whatever – in a neighbourhood can deter crime, even benefiting local people who don't themselves go to the barbecues.

Not all externalities are positive. Some networks have been used to raise finance for terrorism. Just as human and physical capital – through knowledge of chemistry or aircraft, for instance – can be used for bad purposes, so can social capital.

Moreover, social capital comes in many forms, not all fungible. A dentist’s drill and an oil-rigger’s drill are not interchangeable. Similarly, we need to distinguish among different types of social capital, like the difference between “bonding” social capital – these are links among people who are similar in ethnicity, age, social class, or whatever – and “bridging” social capital, which are links that cut across various lines of social cleavage.

But the main point is that social networks can be a powerful asset, both for individuals and for communities.

The idea of social capital has not been without its critics. Where do you see its particular strengths and weaknesses?

Naturally all theories are open to question, even the general equilibrium idea in mainstream economics. I've heard three broad complaints about social capital. First, it is theoretically sloppy; second, the evidence of causal direction is weak; and third, it has no policy levers.

It’s true, as I said before, that in the early days of the idea there was a certain “irrational exuberance” among some enthusiasts, such that anything good was termed “social capital,” but throughout the last decade, careful researchers have converged toward a rigorous core concept. The central theses that social networks have effects on information flow and that repeated interactions in networks can help resolve dilemmas of collective action are entirely consistent with conventional economic theory. Even the idea that networks can affect “identity”– if I interact more often with a group, I’m more likely to take their interests into account – is akin to some recent work on “endogenous preferences” in economic theory.

Advocates of the “social capital” lens have reported many robust correlations between vibrant social networks and outcomes like better school performance, lower crime rates, better public health, reduced political corruption, improved market performance, and so on. For example, several recent sophisticated econometric studies in Italy have shown that places with higher social capital have more efficient capital and labour markets, exactly as the theory would predict, even after controlling for all the other factors that might be thought relevant.

But that does not prove causation. This will be hard to do, since it’s not easy to imagine an experiment in which some people are

Putnam, R.D. (2000), Bowling Alone: The Collapse and Revival of American Community, Simon & Schuster, New York.

Putnam, R.D. (2003), Better Together: Restoring the American Community, Simon & Schuster, New York. With Lewis Feldstein and Don Cohen.

Field, S. (2001), “Does team spirit make economic sense?”, in OECD Observer, No. 227/228, available online at www.oecdobserver.org/teamspirit2001

OECD (2001), The Well-being of Nations: The Role of Human and Social Capital, Paris. Policy-makers should not have to wait for a couple of decades of detailed research before asking whether attentiveness to social capital might be worth their while.

©OECD Observer No. 242, March 2004

Related links
• See Dr Putnam’s Harvard web page
• See “Does team spirit make economic sense?”, in OECD Observer, No. 227/228 • To read all the related articles, click here