Culture, Trust & the Economy
Social Capital
How networks, relationships and community ties act as a form of capital that helps people and communities get things done.
Economists talk about physical capital, like machines, and human capital, like skills. Social capital refers to the networks, relationships and shared norms that help people cooperate and achieve things together.
The idea
People with strong networks can find jobs, borrow money in emergencies, share information and get help. Communities with strong ties can organise to solve problems, such as building a school or keeping streets safe.
Putnam’s work
The political scientist Robert Putnam popularised the concept. In a study of Italian regions, he argued that northern regions with strong traditions of civic associations had more effective governments than southern regions. In his 2000 book Bowling Alone, he argued that social capital had declined in the United States, as people joined fewer clubs, associations and community groups.
Types of social capital
- Bonding social capital: close ties within a group, such as family or caste networks. It provides support but can exclude outsiders.
- Bridging social capital: ties across different groups, which spread information and opportunities more widely.
Economic effects
- Jobs: many people find jobs through personal contacts. Research by sociologist Mark Granovetter in 1973 highlighted the “strength of weak ties”: acquaintances often provide more useful job information than close friends, because they connect to different networks.
- Informal insurance: in villages, networks help households cope with shocks.
- Microfinance: group lending uses social ties to encourage repayment.
In 2022, a large study using Facebook data by Raj Chetty and colleagues found that economic connectedness, friendships between people of low and high income, strongly predicted upward income mobility for children from low-income families.
A young graduate is looking for work. Her close friends know the same opportunities she does. But a former classmate's uncle, whom she barely knows, mentions an opening at his company. She gets the job. Weak ties connect people to new information that close circles do not provide.
Strong group ties can also exclude outsiders, enable corruption or reinforce discrimination. The type of social capital, and whom it connects, matters.
- Social capital is the networks and norms that help people cooperate.
- Putnam linked civic traditions to effective government and warned of declining social capital.
- Bonding capital supports groups; bridging capital connects different groups.
- Friendships across income groups strongly predict upward mobility, research found.
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