social capital the aims of these notes – social capital: a controversial concept three key words...

SOCIAL CAPITALSOCIAL CAPITAL

THE AIMS OF THESE NOTES– Social capital: a controversial concept

THREE KEY WORDS– Networks– Trust– Institutions

SOCIAL CAPITAL: SOCIAL CAPITAL: NETWORKSNETWORKS

What is a networkDifferent types of networkStrong and weak tiesCommon valuesSanctionsNetworks as a form of capital


Nan Lin definition of social capitalNetworks as a source of social capitalThree layers of social networks

– The inner layer– The intermediate layer– The outer layer

The utility of each level of layer


The dual nature of social capital Social capital as a private resourceSocial capital as a public goodRelational capitalSystem capital

SOCIAL CAPITAL AND SOCIAL CAPITAL AND TRUSTTRUST

What is trustLanguage technicalitiesWhy trust matters


Trust and networksThe sources of trust: different viewsStrategic trust:

– Trust as a result of selfish strategies– Reputation– Repeated interactions


Trust as pure altruism– Trustworthiness as a characteristic of individual

preferences (Ostrom)– Trust as a moral value (Huslaner)– Trust as innate in human nature (Woolcock and

Radin)

History and experienceTrust as a complex phenomenon


Generalized trustParticularized trust


Networks, trust and civic engagementPutnam’s contributions Civic engagement as the primary source of

social capitalVarious forms of civic engagementCivic engagement and democracyDeliberative democracies

SOCIAL CAPITAL AND SOCIAL CAPITAL AND INSTITUTIONSINSTITUTIONS

Society centred approach to social capital versus

Institutions centred approach to social capital


Institutions as rules of the gameInstitutions as political actors


Institutions at work in producing social capital– Effectiveness of the court system– Constraints derived from informal rules– Fairness in the design and implementation of

policies– Efficiency and skills in coordinating collective

action


Social capital as an input and as an outputSocial capital as unintended result of

actions engaged for different purposesSocial capital as a goal of policyPolicies for social capital


The dark side of social capital– When social capital produces negative

externalities– When social capital harms the same members

of the network– Social capital and inequality– Studies on bad social capital


Types of social capital– Bonding social capital– Bridging social capital– Linking social capital

Types of social capital and bad social capital

SOCIAL CAPITAL AND SOCIAL CAPITAL AND ECONOMICSECONOMICS

Social capital and transaction costsSocial capital and collective actionSocial capital and economic development


Social capital and transaction costs– All contracts are costly– All contracts are incomplete and therefore risky– There is a trade off between cost of contracts

and completeness of contracts– The more the contracts are complete the more

they cost. The less are complete the less they cost


– Social capital in the form of trust makes contracts less risky and less costly

– Social capital reducing the cost of transactions make possible trades that otherwise would have not taken place or would have taken place at an higher cost


Social capital and collective action– When we need a collective action– A typical trust situation– The essence of the collective action problem– Ways out from the impasse


Collective action is needed to produce goods which cannot be produced or not in the necessary quantity in normal market functioning

The trust situation is a version of the prisoner’s dilemma

Subject A must decide whether to entrust subject B without the possibility of a constraining agreement that allows to the two parts the implementation of a joint strategy


If A decides not to entrust B, no transactions will take place and the payoff will be nil for both parts

If A decides to entrust B, B must decide whether to reciprocate or not

If B reciprocates, both parts will get a payoff equal to f.


If B decides to exploit (not to cooperate), A will get a pay off equal to –n and B a pay off equal to f + n (where f and n are both positive values)

The essence of the collective action problem lies in the conflict between B’s private interest and the collective interest


The solution of this game is that no transactions will take place in a one shot game

A knows that B’s private interest is not to reciprocate. Then A knows that if he entrusts B, his pay off will be negative. Then A decides not to entrust B at the outset The pay off for the two parts will be nil


FIG. 1. Il gioco statico della fiducia

Payoffs A B Onora la fiducia di

A f f

(ramod)

Si fida di B B

Abusa della fiducia

di A -n n+f

A Non si fida di B 0 0

Fonte: adattamento da Kreps (1990)


Possible solutions to the collective action problem:– A and B belong to the same network and are

bound to cooperate an indefinite number of times in the future (context of repeated games)

– B fears the sanctions of an effective court system (and A knows that)


– B fears to lose his reputation and the informal sanctions by his group (and A knows that)

– A and B live in a community with a long tradition of successful collective actions and share values of reciprocity and cooperation

– A and B have an altruistic component in their preference function


Social capital matters for economic development

For national growth, linking social capital is important in the form of generalized trust

Generalized trust implies confidence in institutions and a positive bias towards the citizens’ honesty


For local development, bonding and bridging social capital matter

Bonding social capital and strong ties favour social cohesion and the growth of a strong sense of identity

But bonding social capital may harm local development if it leads to closure and intolerance


Then bridging social capital and weak ties are important because they open the communities to new relationships, information and knowledge

social capital the aims of these notes – social capital: a controversial concept three key words...

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