An Essay on Social Capital : Reflections on a Concept Linking Social Sciences

Social capital is defined as mutual trust. It is related to production by a key hypothesis: social capital determines how easily people work together. An easy-to-use proxy (Putnam's Instrument) is the density of voluntary organizations. Social capital might be a new production factor which must be added to human and physical capital, or it might enter as a reduction in either transaction or monitoring costs. A direct and an indirect way to measure social capital is discussed. The crucial question is if social capital can be changed. That is, if self-enforcement can replace third-party-enforcement. This is closely related to the issue of institution building. Finally, it is discussed how much harm totalitarian regimes do to social capital, when they expand their area of central control