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Once,
economists studied physical capital--the bricks and
mortar of economic life. Then, they studied investment capital--the financial resources
that provide the wherewithal to build industry. More recently, economists have explored
the role of human capital--the endowments of education and health that individuals
possess.
Now, in belated
recognition of the importance of group membership and social relationships, economists are
studying "social capital." Hard to measure and difficult to define, social
capital comprises an intricate web of relationships, norms of behavior, values,
obligations, and information channels. Within groups and regions, its presence may boost
productivity and incomes, while its absence may hinder growth.
The essential quality of social capital, as opposed to physical or human capital, is that
it reflects a community or group and that it impinges on individuals regardless of their
independent choices. That means that if community leaders toil to elevate the quality of
life, reduce crime, and improve the schools in a neighborhood, all area residents get to
enjoy the benefits.
The wealthy
industrial town of Lumezzane, Italy, is one example of social capital at work set forth in
a groundbreaking 1993 book by Harvard political scientist Robert Putnam. In the book he
showed that the high levels of social capital in northern Italy in the 1970’s and
1980’s were associated with strong economic growth and effective local and regional
institutions, while relatively lower levels in southern Italy were linked to weak
performance.
Other researchers,
too, are finding that social capital is a concept with global applications. Some are
linking growth rates with levels of trust, and economists are now using the results of
studies to correlate growth and trust systematically.
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