The Economic Value of Social Connection

Why relationships and community are among the strongest drivers of wellbeing, how economists try to put a value on them, and the economic costs of loneliness.

When researchers look for the strongest predictors of a good life, relationships come up again and again. People with close friends, supportive families and a sense of belonging in their community tend to report much higher wellbeing. For economists, this raises an important question: if social connection matters so much, how should we value it, and what does it cost societies when it is missing?

Economists and sociologists use the term social capital to describe the networks of relationships, shared norms and trust that help people cooperate. The political scientist Robert Putnam popularised the idea in his study of declining community participation in the United States. Like physical capital, such as machines, social capital can make a society more productive: when people trust each other, they can trade, share information and solve problems with less cost and conflict.

Research led by the economist John Helliwell, a founding editor of the World Happiness Report, has found that trust in neighbours, colleagues and public institutions is strongly linked with life satisfaction across countries. Having someone to count on in times of trouble is one of the key factors the World Happiness Report uses to explain differences in happiness between nations.

Putting a value on relationships

How can something as personal as friendship be given an economic value? One approach, called wellbeing valuation, compares how much life satisfaction rises with a relationship or activity to how much it rises with income. If seeing friends regularly is linked with the same life satisfaction boost as a large pay rise, that suggests social contact is worth roughly that amount to people. These estimates are rough and debated, but they consistently suggest that social connection is worth a great deal - often far more than people might guess.

Comparing a pay rise and a weekly meet-up

Suppose a study finds that people who meet friends at least once a week report life satisfaction about half a point higher on a 0 to 10 scale than otherwise similar people who rarely do, and that it would take a very large increase in income to produce the same half-point rise. Using wellbeing valuation, economists would conclude that regular social contact is worth a large amount of money to people - even though no money changes hands.

The costs of loneliness

Loneliness - the painful feeling that one’s relationships are fewer or less close than one wants - is increasingly recognised as a public health and economic issue. A widely cited 2010 review led by the psychologist Julianne Holt-Lunstad combined results from nearly 150 studies and found that people with stronger social relationships had around a 50 percent greater likelihood of survival over the study periods than those with weaker ones.

Loneliness is linked with depression, heart disease and dementia, which raise health care costs, and with lower productivity at work. In 2018, the United Kingdom appointed a government minister with responsibility for loneliness, and in 2023 the United States Surgeon General issued an advisory describing loneliness and isolation as a serious public health concern. Disabled people, older people living alone, and people who have moved far from family are among those at higher risk, often because of barriers that make it harder to get out and meet others.

Designing for connection

This research suggests that parks, libraries, community centres, accessible transport, and public spaces where people can meet have economic value that simple cost calculations may miss.

Treating anything unpaid as worthless

Because friendship, community and trust are not bought and sold, they do not appear in GDP. It is a mistake to conclude they have no economic value. They affect health, productivity and wellbeing in measurable ways, and ignoring them can lead to decisions that save money in the short run but weaken communities.

Key takeaways

Social connection is among the strongest predictors of wellbeing.
Social capital, meaning networks and trust, helps societies cooperate and prosper.
Wellbeing valuation suggests relationships are worth a great deal in money terms.
Loneliness carries real health and economic costs, and some groups face higher risk.