orgtheory.net

a defense of social capital as capital

Taylor Davidson revives the discussion (also carried on recently over at Orgs and Markets) over whether social capital is really “capital”.  I am sensitive to the idea that spreading a word’s definition too thin ultimately leads to the word losing meaning.  That is definitely a danger here and so it’s incumbent on people who use the term (like me) to build the case.

I define capital as any asset available for use in the production of further assets.  One might dismiss that as only “capital in the loosest sense”, but I think its a fairly precise and also widespread understanding of the word.  To be a form of capital then, social capital must beget the production of further assets.  Four kinds of further assets, in particular, are important: information, control, trust and collective action.  These correspond to the two major kinds of social capital:

  1. Social capital as the value of relationships held by an individual.  And the “assets” which relationships provide come down to information and control.  People with “more” social capital gain access ideas, insights, opportunities, knowledge, etc., more quickly and more accurately than people who do not.  So: relationships are an asset that produces information which produces lots of other assets like jobs and innovations.  This is basically Mark Granovetter’s insight which Ron Burt later tweaked in the structural holes argument.  Ron’s unique insight was to layer the asset of “control” on top of information.  In Ron’s view, relationships are instrumental in giving an individual the ability to control others (this is at the root of his discussion of structural equivalence and the tertius gaudens).  Control is an asset that produces the ability to produce further assets.–> One wrinkle on social capital in the individual sense which I’ll concede bothers me a bit too: The value of a relationship is not really held by an individual; it’s held by two individuals.  If I’m defining capital as an “asset” then this potentially undermines the argument since, as Taylor points out, a relationship is not owned, uniquely, by either party to the relationship and either party can unilaterally terminate the “asset”.   I see it as simply a fact on the ground to be dealt with but a purist might say that’s a deal breaker.  So be it.
  2. Social capital as the value of relationships held by a community of actors.  This is, basically, Robert Putnam’s view and it’s also the one I employ in much of my research.  For Putnam, relationships beget trust which begets (essentially) lower transaction costs; if I can agree to produce something with a handshake rather than hiring a lawyer to write a contract, then more value is produced on both sides of the transaction.  As for me, I don’t think so much in terms of trust.  I think of a community’s social capital as a proxy for its capacity to engage in collective action.  So—for example in the case of a region—capacity for collective action is an asset that produces infrastructure improvements and infrastructure improvements produce the ability to attract and retain investment.  One thing about this definition is that I think it avoids the “problem” of individual ownership.  Social capital in this sense is “owned” by the community of actors as a collective.

Written by seansafford

May 29, 2009 at 2:25 pm

Posted in uncategorized

16 Responses

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  1. Any chance that social capital itself is an epiphenomenon of the actors involved?

    The problem, as with many social constructs, is that we observe the social dimensions but not the potentially upstream, confounding nested antecedents —- so, there is self-selection, choice, ex ante characteristics, and all kinds of dynamic processes that are unobserved and not accounted for. This, of course, is not to say that social capital does not exist, but a key question is the effect size of the social factor compared to the individual-level antecedents.

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    tf

    May 29, 2009 at 4:39 pm

  2. An implicit component of capital, in whatever form, would have to be its exchange value. Cultural capital, in the form of higher education for example, is only worth so much if there are others willing to exchange it for other forms of capital – be it economic, symbolic (in terms of legitimacy), social (school alumni, etc)…

    Also, there’s the question whether scarcity is implied when one talks about capital. I think it is, but looking at the ever-increasing US money supply makes me wonder.

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    Alex

    May 29, 2009 at 10:41 pm

  3. This is a battle I have been fighting and losing, but…. one more charge into the front lines: If a “capital” is “any asset available for use in the production of further assets,” what is NOT capital?
    Skills, friends, money, stupid pet jokes, enemies, old bubble-gum wrappers, a sense of humor, a bald spot — well maybe not that — can under some scenario be not only “available” but actually transferred into another “asset.” So, what good does such undiscriminating usage do?
    And it does bad: it throws into the same pot diverse phenomena, such as family ties, professional networks, feelings of trust — conflating, not distinguishing.
    And who needs it? Why not call friendships friendships, math ability math ability (rather than “human capital”), knowledge of art knowledge of art (instead of “cultural capital”)?

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    csf

    May 29, 2009 at 11:00 pm

  4. On the topic: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1351852

    Very nice case study, tightly argued and trying to bridge Econ and Sociology. The setup is clever: look for a setting where you wouldn’t expect to see social “capital” and see what you find. Still some loose ends to tie, but cool stuff.

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    Isabel

    May 29, 2009 at 11:54 pm

  5. csf – yes, you can call a rose a rose. I think for most of everyday life that’s a better option. Largely because the term capital has an instrumentalist ring to it and for many of the things you mentioned – friendships, knowledge of art and so on – we develop them because, well, we like to.
    But I think conceptualising these same things in terms of capital helps when you’re analysing relations in social science. Hence the intrinsic exchange value of capital that I mentioned earlier. For one, it can reveal inequalities in the distribution of said capital. Nevertheless, capital remains a term used to depict a means-end relationship. So can “values” can be conceptualised as capital at all?
    I don’t think they can. Being good because you want to go to heaven (spiritual capital, haha) is not the same as being good because it is a worthwhile in itself.

    P.s. Amendment to my earlier post: I meant to write “human capital” (higher education) instead of “cultural”.

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    Alex

    May 30, 2009 at 12:24 am

  6. On the SSRN paper that Isabel links to (Elfeinbein-Zenger) and O&M highlighted — a quick plug: Dan and Todd will be presenting that paper in an AOM PDW session on research at the nexus of economics and sociology (also with Mark Zbaracki and Ezra Zuckerman).

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    tf

    May 30, 2009 at 12:39 am

  7. Alex, what do you mean by the “intrinsic exchage value” of all these capital-like concepts? The point of my O&M post is that none of these is, in fact, exchanged. We have no idea how much they are “worth” because there are no discrete units of these things that are traded in markets and can be evaluated at the margin. Even human capital is not traded; what is traded are books, college educations, labor services, etc. Buildings, tools, trucks, refrigerators, and the like, by contrast, are not only produced means of production but economic goods you can rent or buy. That’s a pretty important difference.

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    Peter Klein

    May 30, 2009 at 1:04 am

  8. ops… I linked to the paper without knowing about the O&M post (or checking Sean’s link)… apologies for the repetition. I guess the authors are indeed on to something – getting noticed by different unrelated sources…

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    Isabel

    May 30, 2009 at 2:08 am

  9. Hi Peter,

    I meant that non-economic forms of capital can be exchanged for economic or other non-economic forms of capital. This might be different from how you perceive it, but I’ll elaborate my take on it (which is taken largely from Bourdieu’s forms of capital).
    For example, my college degree has a market value when I go out into the labour market straight after graduation. In this sense there is an exchange value between the human capital I possess after 4 years of college and the economic worth of my labour. Another example is how access to restricted economic markets might depend on the social relations a person has (black markets, insider trading,etc). What’s interesting in this case is that people in the restricted market pay a different price for the same object than those in “free” markets, and not just because of supply/demand factors.
    These non-economic forms of capital might not have discrete units, but there is marginal value in the way that having a tertiary education is worth more in the labour market than a high school education(hence the numerous articles in the local media saying grads have higher starting salaries than grads).
    Unlike financial markets, arbitrage opportunity is limited when the exchange rates between forms of capital differs. One reason is durable institutions and resilient social norms. An old example (which might not be valid now) is how professionals in the US had greater job mobility and could move laterally across firms more freely than professionals in Japan, where vertical movement and school ties were more privileged in the labour market.

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    Alex

    May 30, 2009 at 4:53 am

  10. Alex, I don’t deny the phenomena you describe, I just question the value added of describing them in terms of “capital.” Wages reflect the marginal revenue product of labor, and education tends to increase the MRPL, and hence the wage. Why not just say that education, relationships, experiences, etc. make some types of labor more valuable than others? Certainly tertiary education has value, on the margin, but what is valued is the labor of the educated worker, not the education itself.

    My point is simply that the economic return to both educated and uneducated labor is a wage (the rental price of labor). To say that the uneducated worker earns a wage for he effort, while the educated worker earns a wage for his effort plus an interest return on his human capital, seems arbitrary at best and confusing at worst (as csf’s comment above suggests, *every* worker has at least some “human capital,” some social capital, etc.).

    What phenomena can you explain using these expansive capital concepts that you can’t explain just as well without them?

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    Peter Klein

    May 30, 2009 at 5:33 am

  11. To me, the term capital prompts one to ask what the means of production are, how and where the different forms of capital are accumulated, and the relations between supplier and consumer. If I look at education as a specific form of capital accumulation, then I become aware of a whole set of relationships that might not be revealed if I took education “as is”.

    But it’s true that once the sociological imagination is awakened, the term ‘capital’ might be redundant.

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    Alex

    May 30, 2009 at 7:36 am

  12. “Social capital as the value of relationships held by an individual. .”

    Social capital is a common good, it is not owned or held by individuals, but exists in the value of the relationships that they enter into. We don’t own relationships we take part in them. Take away other people and you take away social capital.

    The term capital becomes valuable when relating the value of relationships and interactions between people with reference to other forms of capital. Take ‘social capital’ away and the rest lie untouched.

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    Colin

    May 30, 2009 at 4:55 pm

  13. I’m not sure I’ve seen anything in this discussion which dissuades me. Exchange value: I’m sure it’s been studied in some guise, though I can’t think of a specific paper, but people seek out and pay for others’ social capital all the time. Lawyers get hired as a result of the social capital they bring (think Vernon Jordon); specific mentors are sought out because of the social capital they have. As for scarcity—speaking about individual social capital—there really is only so much time and effort one can devote to relationships; you need to concentrate on only a few to make them meaningful. So I think there is a case for scarcity.

    I am all for the effort Elfenbein and Zenger seem go to to show that it actually does have value independent of other influences. I’m definitely looking forward to reading the paper. But I’m not sure it’s necessary to show that to justify using the word.

    The broader point Peter and others are making is that there needs to be some value to employing the word “capital” beyond simply grabbing attention because otherwise it waters down the precise meaning of the word. This is the pertinent question:

    …what good does such undiscriminating usage do? And it does bad: it throws into the same pot diverse phenomena, such as family ties, professional networks, feelings of trust — conflating, not distinguishing. And who needs it? Why not call friendships friendships, math ability math ability (rather than “human capital”), knowledge of art knowledge of art (instead of “cultural capital”)?

    Relationships may be simply relationships. Or, it could be that particular kinds of relationships and particular structures of relationships are more useful for generating wealth than others. Only the latter claim elevates the concept to something worth of being called a form of capital. So different kinds of relationships and different structures of relationships are more valuable than others; they command a larger price on the market for the person who holds them…

    All that said, a careful read of my book should reveal that I avoid the term whenever possible. I far prefer “social structure”. Thats because I do think there is a relatively limited set of circumstances in which “social capital” is the correct term in a precise sense. My book is much more about how social structure facilitates (or impedes) collective action. Collective action is the ‘resource’. But, when I try to translate the key idea to a lay audience I definitely find myself slipping into the “social capital” usage.

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    Sean Safford

    May 30, 2009 at 7:50 pm

  14. I could not possibly agree with CSF more. Portes I believe made a similar point that the general usage of social capital has devolved into more or less anything social in nature that is good for some one or group. Even in Coleman’s ’89 article there are at least 2 or 3 distinct definitions of social capital at work. Sadly, I think the term is deeply entrenched now and isn’t going anywhere. But the last thing sociologists need though is another vague term to bat around. But Sean’s revival of this discussion is, think, useful. Indeed, it would be interesting to have this same debate about “social structure” and “institutions.”

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    Thorstein Veblen

    May 30, 2009 at 9:23 pm

  15. […] These domains of action have their own “capital” – resources that can be used to further one’s position and create more resources (see Sean’s post). […]

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  16. […] is not a trivial point. Indeed, as Sean Safford over at OrgTheory noted a while back, social capital IS capital. And I think his dual definition of […]

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