Asian Journal of Social Science, Volume 37, Number 3, 2009, pp. 480-510
What is Social Capital? A Comprehensive Review of the Concept
Humnath Bhandari and Kumi Yasunobu
Social capital is an old concept but it entered into academic and policy debates only in 1990s. Its
importance in explaining economic and social phenomena have been increasingly felt in recent
years. Literature on theoretical and empirical aspects of social capital grew significantly during
last decade. The whole notion of social capital is centred on social relationships and its major
elements include social networks, civic engagement, norms of reciprocity, and generalised trust.
Broadly speaking, it is defined as a collective asset in the form of shared norms, values, beliefs,
trust, networks, social relations, and institutions that facilitate cooperation and collective action
for mutual benefits. It is a complex multidimensional concept having different dimensions, types,
and levels of measurement. Common types of social capital include: structure and cognitive;
bonding, bridging, and linking; strong and weak; and horizontal and vertical. It can be
measured and analysed at individual- and collective-levels in terms of social perspective and
micro-, meso- and macro-levels in terms of geographic perspective. The properties of social
capital, such as capacity to appear in as an explanatory variable in the production function,
accumulation over time, capability of improving economic performance, investment with
expected future returns, convertibility, and the need of maintenance, make it qualify as a form of
capital, though there are some criticisms about the use of term ‘capital’ in social capital.
Research on social capital remains in its initial stage and the concept is still elusive, prone to
contextual definition, deficient in common measurement indicators, inability to explicitly
quantify effects, and subject to various criticisms. Conceptual and measurement imprecision has
led the concept prone to vague interpretation, less empirical application, and underestimation of
its value. More empirical studies and testing of the concept on the ground is needed to develop a
commonly accepted definition and measurement indicators that can explicitly disentangle and
quantify its effects on overall development processes. Better conceptualisation and
operationalisation of social capital theory is helpful to attract more investment on its
development, design appropriate social policies, and promote sustainable development.
Keywords: social capital, review, definition, types, controversies, economic development
Social scientists and development experts often puzzle to explain why economic growth and
development differ significantly across countries or regions that enjoy virtually equal access to
technology, resources, and market in a modern global world. Explaining large economic
disparities across countries having otherwise identical production environments in terms of
technology and capital (natural, physical, and financial) is a major challenge for researchers. In
the past, economists employed different theories to address the variation in economic
development, but satisfactory explanations still remain at large. For many decades, the standard
economic theories, such as Solow growth model and Walrasian equilibrium model, were the
dominant mode of economic analysis. These rational choice models assumed that economic
variables account most, if not all, of variations in economic outcomes. These theories focused
primarily on economic variables and hardly recognise the potential role of social and cultural
factors on economic development. Essentially, socio-cultural factors were left unaccounted for in
standard economic theory (Bilig, 2000). Even now, mainstream economic theories pay little
attention to social values and are reluctant to rely on these values as potential determinants of
economic outcomes (Barro and McCleary, 2002; Guiso et al., 2006).
Over time, economic theories have been criticised on various grounds. First, they fail to
explain economic growth and development outcomes fully. The literature argues that standard
factors of production (technology, physical capital, and human capital) explain only part of the
development story. There are social and cultural factors (norms, values, beliefs, and institutions)
that play prominent roles in economic performance and we need to account those cultural factors
in explaining development (Easterly and Levine, 2001; Christoforou, 2005). Second, they are
unable to explain why unprecedented economic growth is not sustainable and usually
accompanies undesirable outcomes, such as income inequality, low improvement in quality of
life, social injustice, social conflicts, adverse effects on environment, etc. Third, they fail to
account social values systems in economic development. Fukuyama (2001) criticised that
economists normally make simplifying assumptions that human beings are rational and their
utility maximising behaviour is invariant across societies. As a result, they ignore the social
value systems. All these criticisms are interrelated and emphasized the importance of social and
cultural factors in economic theories. This seems to suggest that viewing development from a
one-dimensional (economic) perspective would be a conformist idea. Indeed, economic activity
is deeply embedded in social structure, where socio-cultural values influence personal traits of an
individual that consequently affects the economic outcomes (Carpenter et al., 2004; Chuah et al.,
2005; Sabatini, 2006). Therefore, social factors are key determinants of economic progress and
hence economic theory without socio-cultural variables is deficient (Inglehart, 1997).
Development is a complex multidimensional process involving major changes in social
structures, behaviours, and national institutions, as well as the acceleration of economic growth,
reduction of poverty, narrowing of inequalities and improvement in the quality of life (Todaro,
2000). It, thus, embraces economic, social, cultural, political, and environmental variables.
Development, thus, is not a mere increase in per capita income as mainstream economists often
argue, rather it is an improvement in quality of life, which requires equal consideration of
underlying social and cultural systems. Obviously, economic variables are prominent driving
force of development, but the frontier of development transcends beyond income. Socio-cultural
value systems help shape the economic, social, and political behaviour and affect development
through indirect multiple channels. Successful explanation of economic development, thus, has
to go beyond narrow measures of economic variables to encompass social and political variables
(Johari, 1989; Barro and McCleary, 2002). Social scientists, particularly economic sociologists
and development economists, believe that cultural values pervade economic behaviour and,
hence, they cannot be ignored in economic analysis (Granovetter, 1985; Fukuyama, 2001;
Harrison and Huntington, 2000; Tabellini, 2005). If development is defined not just as growth in
per capita income, but more broadly as improvement in the quality of life, then cultural values
can serve as both the ‘means’ and ‘ends’ of development (Sen, 1999). This implies that both
economic and social factors are equally crucial in explaining the economic phenomena.
The cultural dimension was considered to stay beyond the purview of economic
behaviour in the past. But as economic development ended up with low welfare improvement
and rising social problems, and economic models failed to explain the economic behaviour fully,
cultural dimension has became subject of interest into economic discourse (Ben-Ner and
Putterman, 1997). This led to re-orientation of the development approach, placing emphasis on
norms, values, beliefs, and institutions as well. The basic notion is that a proper understanding of
the welfare and economic situation of society can only be achieved if the social dimension is also
taken into account (Iisakka and Alanen, 2006). The importance of socio-cultural values as
essential parameters of development came to surface in 1960s. Besides standard factors of
production, economists realised the importance of quality of labour in production and started
including human capital (knowledge and skills) as a factor of production. Later on, it was
recognised that not only human capital, but also cultural factors are important in economic and
social outcomes. This reorganisation of social components on development led to the birth of
social capital in 1990s (see Lucas, 1976; Harrison and Huntington, 2000; OECD, 2001). Indeed,
rising interest on the interconnection between social values and development led to the birth of
the ‘development economics’ and ‘institutional economics’ sub-disciplines. Now, development
institutions, like the United Nations and the World Bank, have recognised cultural diversity as an
important component of development process and have started incorporating local cultural
factors in their development programmes. Literature looking at the relationship between culture
and economic phenomena has been growing substantially since then.
Prominent scholars, such as Max Weber, Amartya Sen, Samuel Huntington, etc., claim
that culture interacts with economic development in many ways and, hence, cultural dimensions
are critical in understanding economic behaviour (Sen, 1999; Landes, 2000). Empirical studies
have established the positive influence of socio-cultural values and institutions on economic
growth and their critical role in the success of developed countries (Huntington, 1998; Inglehart
and Baker, 2000; Hjerppe, 2003). Fukuyama (2001) contended that economic development is
influenced not just by the existence of formal institutions, but also by certain norms and values
that accelerate exchange, savings, and investment. He outlined four means through which culture
affects economic behaviour—impact on organisation and production, attitudes towards work and
consumption, the ability to create and manage institutions, and the creation of social networks.
The strong linkage between culture and development has been well established now and social
scientists are now paying more attention as to how social values can shape the overall
development process (Inglehart, 1997; Beugelsdijk, 2003; Guiso et al., 2006; Sabitini, 2006).
The strand of literature looking at the relationship between social values and development
patterns is on rise (Putnam, 1993; Fukuyama, 1995; Barro, 1997; Inglehart, 1997; Knack and
Keefer, 1997; Zak and Kanck, 2001; Gradstein and Justman, 2002; Beugelsdijk, 2003; Pryor,
2005; Guiso et al., 2006; Sabitini, 2006). Incorporation of cultural values in economic models
make economic discourse richer, more valuable, better able to capture the nuances of the real
world, and make them more useful (Guiso et al., 2006).
Mainstream neo-classical growth models started with variables physical capital and
labour, then included human capital, subsequently incorporated institutions, and has finally
considered including culture. In the 1990s, a new school of thought on the determinants of
economic development emerged, which embracing the concept of social capital (trust, social
networks, and institutions) to explicitly explain the effect of socio-cultural values in economic
behaviour. This is essentially a reorientation of institutional economics. Social capital embodies
cultural traits of a society and is considered as source of wealth (Putnam, 1993; Fukuyama,
1995). The differential impact of norms, values, and beliefs on trust, networks, and institutions is
the basis of social capital (Fukuyama, 2001). The appealing characteristic of social capital is that
it can be conceptualised and measures in specific forms and can be incorporated into standard
economic models (Guiso et al., 2006; Sabitini, 2006).
Researchers have uncovered the role of social capital in economic progress and
sustainable development (Putnam, 1993; Knack and Keefer, 1997; Sabatini, 2006). Granovetter
(1985) argues that most economic behaviours are embedded in social networks. Social capital
plays a significant role in providing access to more information, increasing social cohesion,
better civic engagement, reducing opportunistic behaviour, boosting political participation,
government responsiveness and efficiency, reducing transaction costs, providing insurance
against risk and uncertainties, and solving collective actions problems (Coleman, 1990; Putnam,
1993; Fukuyama, 1995; Woolcock and Narayan, 2000; Lin, 2001; Paxton, 2002; Welzel et al.,
2005). Empirical studies have established the positive effect of social capital on health,
educational outcomes, social welfare, and reducing tax evasion (UNESCO, 2002; Productivity
Commission, 2003; Hombres et al., 2006). Social capital, thus, has a potential to serve as
powerful means of development. It can shape the economic outcomes at both the micro and
macro levels (Rodrik, 1998). Recently, social scientists, including economists, have became
increasingly interested in social capital and have been using this concept as an explanatory
variable to explain economic behaviour (Knack and Keefer, 1997; Temple, 2001; Sabatini, 2006).
Large numbers of empirical studies have claimed the positive correlation between social
capital and development. Nevertheless, the social capital concept is plagued by theoretical
vagueness and conceptual weakness (Ponthieux, 2004) and its practical value has been
challenged on various grounds. Sabatini (2006) claims that the relationship between social
capital and economic development is still unconvincing and sometimes conflicting. He outlined
three weaknesses of social capital—no universal definition and measurement method; no
unanimous agreement on the positive relationship between social capital and development; and
even when a positive relationship is established, doubts remain on the causal nexus between
social capital and its outcomes. Chen (2005) argues that despite actual and perceived positive
influence of social capital, there is still some scepticism about whether and how much influence
it exerts on economic development and social transformation. Empirical studies on social capital
suffer from lack of uniformity with regard to indicators and approaches used to measure aspects
of social capital (Harper, 2002). It seems to suggest that social capital is still surrounded by
various practical unanswered questions and it is far from clear. However, there is no doubt that it
is a promising construct in fostering economic outcomes and, at least, it has become a subject of
interest and opened the room for further theoretical and empirical discussion. The formidable
challenge ahead is to measure social capital empirically and to establish clear and systematic
evidence that social capital indeed is an important predictor of economic outcomes.
Social capital is a newborn concept and research on the topic remains in its initial stage.
It is a highly appealing and potential promising concept. Nevertheless, its potential value can be
harnessed only when it is properly defined, operationalised, and proven to have explanatory
power (Woolcock, 1998). Commonly accepted definition, operationalisation, and measurement
of social capital are essential to understand the concept comprehensively, to measure it in a
consistent and coherent fashion, and to explicitly disentangle its effect on economic and social
outcomes. Although, literature on the subject grew at an exponential rate in the last two decades,
the actual definition and measurement are two issues that are yet to be resolved. The concept is
still elusive, prone to contextual definition, deficient in commonly accepted indicators, unable to
explicitly quantify effects, and subject of severe criticism. Conceptual and measurement
imprecision has led it prone to vague interpretation, less empirical application, and
underestimation of the importance. Indicating the need for firm definition, Castle (1998) said that
unless the social capital concept is used with some degree of precision and in a comparable
manner, it will come to have little value as an analytical construct. At the moment, knowledge of
social capital in terms of universal definition, various dimensions, functions, and the impact on
economic outcomes is inadequate to derive clear policy implications. The foremost challenge
ahead is to define the concept explicitly and to find out a simple and commonly agreed upon
methodology that can disentangle its effect on development pattern.
Addressing these issues requires more studies, empirical investigations, and testing of the
concept in the ground. Further studies and discussions could be helpful to understand the
characteristics of social capital, to develop commonly accepted methodology for its measurement,
and to establish its practical value in explaining development outcomes. The objective of this
article is to provide theoretical insights on basic concept of social capital and its implications on
overall development process. Better conceptualisation and operationalisation of social capital
theory could be helpful to design more appropriate social policies, invest resources, and promote
overall balanced and sustainable development. This paper contributes to the social capital debate
through a more systematic review of the concept and through providing various benefits and
policy implications of social capital development on overall economic and social transformation.
Defining Social Capital
Social capital is a complex multidimensional concept encompassing repertoire of cultural and
social value systems. Recently, it has become a very popular and appealing concept among social
scientists. A growing number of sociologists, anthropologists, political scientists, and economists
have employed the concept to explain various economic and social outcomes. The fundamental
notion of social capital is to incorporate socio-cultural factors to explain development outcomes.
It has emerged as a prominent topic of discussion among academics, development specialists,
and policymakers. The history of social capital traces a long way back to classical economists,
such as Adam Smith and John Stuart Mill, and sociologists, such as Max Weber, who provided
the cultural explanation to economic phenomena (Guiso et al., 2006). The concept of social
capital as a topical issue, however, came into the spotlight only in late 1980s and attracted
growing research interest thereafter. The scientific study of social capital is relatively new, but
the growth of literature on the topic is enormous. Despite voluminous literature, there is no
single, universal definition of social capital. It is often defined and measured in a pragmatic and
unsystematic fashion (van Schaik, 2002). Growing interest and numerous studies in recent years
has fine-tuned the concept and measurement approach. Now, at least, there seems to be some
agreement on the conceptualisation and major ingredients of social capital. Social capital is an
abstract idea rather than a firmly tangible phenomenon. The theory of social capital is
particularly rooted on the notion of trusts, norms, and informal networks and it believes that
‘social relations are valuable resources’. Social capital is broadly defined to be a
multidimensional phenomenon encompassing a stock of social norms, values, beliefs, trusts,
obligations, relationships, networks, friends, memberships, civic engagement, information flows,
and institutions that foster cooperation and collective actions for mutual benefits and contributes
to economic and social development.
The intellectual history of the concept of social capital can be traced back to Karl Marx
(1818−1883), Emile Durkheim (1858−1917), Georg Simmel (1858−1918), John Dewey
(1859−1952), and Max Weber (1864−1920); these scholars emphasise the role of culture in
economic development—an implicit use of the idea of social capital. According to Smith (2007),
the concept of ‘social capital’ was first invoked by Lyda J. Hanifan in 1916 to explain the
importance of community participation in enhancing school performance. After long
disappearance of the concept, the concept of social capital was reinvented by a team of Canadian
sociologists (Seely et al., 1956) while studying urban communities, by Homans (1961) for a
theory of social interactions, by Jacobs (1961) while discussing urban life and neighbourliness,
and by Loury (1977) for studying income distribution. All of these authors emphasise the value
of social networks and need to preserve them. The first systematic exposition of the term and its
entry into the academic debates can be attributed to the work of Pierre Bourdieu (1986) and
James S. Coleman (1988). However, it was the pioneering work of Robert D. Putnam (1993) that
heavily popularised the term among social scientists and attracted the attention of researchers
and policymakers. Being a multi-faceted construct, it is hard to expect a single definition of
social capital. Different authors defined social capital in different ways reflecting their own
interest. The most prominent names while discussing the definition of social capital include
Pierre Bourdieu (1986), James Coleman (1988), Robert D. Putnam (1993), Francis Fukuyama
(1995), Nan Lin (2001), OECD (2001), and the World Bank (2007). The commonality of most
definitions is that they emphasise social relations that generate productive benefits. The main
difference between these definitions is that they treat social capital as either personal resources or
Bourdieu distinguishes between three forms of capital: economic, cultural, and social. He
defines social capital as: “... the sum of the actual or potential resources that are linked to the
possession of a durable network of more or less institutionalised relationships of mutual
acquaintance and recognition—in other words, to membership in a group” (Bourdieu, 1986: 248).
This definition emphasises the importance of social network, i.e., the opportunities and
advantages available to members from group membership. Bourdieu considers social capital as a
collectively-owned asset endowing members with credits, i.e., individual good. The author
focuses on instrumental value of social capital to derive economic and social benefits from group
membership and the impetus for individual investment in such membership (Quibria, 2003). The
benefits which accrue from membership in a group are the basis of the solidarity which makes
them possible. The richness of social capital depends on the size of the network and on the
volume of capital (economic or cultural) in these connections’ possession. The capital is
maintained and reinforced as long as members continue to invest in the relationships. Bourdieu’s
idea of social capital puts emphasis on class conflicts: it is a personal asset in the competition
among individuals aiming to improve their own positions as compared to others. Bourdieu’s
definition identifies three elements of social capital: (i) the social relationship that enables actors
to gain access to resources possesses by their associates (i.e., it is resources embedded in social
connections); (ii) the amount of those resources produced by the totality of the relationships
between actors, rather than merely a common quality of the group; and (iii) the quality of those
Coleman (1990:302) defines social capital by its function. It is not a single entity, but a
combination of different entities having two characteristics in common: it is an aspect of a social
structure, and it facilitates certain actions of individuals who are within that structure. The
entities include obligations, expectations, trust, and information flows. It is a productive resource
that facilitates production and make possible to achieve certain ends that would be impossible in
its absence. Social capital inheres in the structure of relations between and among actors. It
facilitates the actions of individual actors and forms the basis of social capital. Efforts to take
membership in a group can be seen as rational investments in social capital. Coleman identifies
three forms of social capital: reciprocity (including trust), information channels and flow of
information, and norms enforced by sanction. Actors (individuals or organisations) can use these
resources to achieve their ends. Unlike other forms of capital, it is not completely fungible across
individuals or activities. Social capital is inherently social, most forms of capital developed
through combined actions of group members. For Coleman, social capital is a public good as it
exists in the relations among people. For Bourdieu and Coleman, social networks are seen as the
means by which collective capital can be maintained and reinforced.
Robert Putnam played a prominent role in popularising the concept of social capital. He
defines social capital as: “... features of social organisation, such as trust, norms, and networks
that can improve the efficiency of society by facilitating coordinated actions” (Putnam, 1993:
167). Social capital refers to connections among individuals—social networks and the norms of
reciprocity and trustworthiness that arise from them (Putnam, 2000: 18−19). For him, social
networks have value and social contacts affect the productivity of individuals and groups. Social
capital is closely related to ‘civic virtue’. The number of civic associations and degree of
participation in those associations indicate the richness of social capital in a society. In that sense
social capital is closely related to civic engagement, participation in voluntary organisations and
social connections, which fosters sturdy norms of reciprocity and trust. Networks of civic
engagement facilitate societal cooperation, coordination, and communication; strengthen
reputations; and, thus, allow dilemmas of collective actions to be resolved. Social capital affects
the productivity of actors (individuals and groups) and it posses the characteristics of public good.
Because of its collective nature, it cannot be transformed into a private good. Stocks of capital
(trust, norms, and networks) accumulate in use and diminish if they are not used.
A significant contribution to social capital theory was made by Francis Fukuyama. He
offered the more specific but significantly different definition of social capital. He defines social
capital in terms of trust as: “... the ability of the people to work together for common purposes in
groups and organisations” (Fukuyama, 1995: 10). Alternatively, he defines social capital simply
as the existence of a certain set of informal values or norms shared among members of a group
that permit cooperation among them (Fukuyama, 1995). He contends that interpersonal trust is
fundamental for social relationships to emerge. Mutual trust improves the cooperation between
individuals, reduces transaction costs, and increases business transactions. Fukuyama emphasises
on the qualities in social relationships (interpersonal trust, reciprocity, shared norms and
understandings, etc.), which permits people to associate with others, and it helps to develop
social capital. Fukuyama’s significant contribution to the theory of social capital is that he
provided a single, most straightforward means to measure social capital: the proportion of people
who think that ‘most people can be trusted’. Nevertheless, given the multidimensional nature of
social capital, it should be just one, but not the only, indicator of social capital.
Lin (2001: 19) defines social capital as: “... investment in social relations with expected
returns in the marketplace.” Operationally, Lin defines social capital as the “... resources
embedded in social networks accessed and used by actors for actions” (Lin, 2001: 24−25). The
concept has two important elements: (i) it represents resources embedded in social relations
rather than individuals, and (ii) access and use of such resources reside with actors. The first
element implies that social capital can be envisioned as an investment by individuals in
interpersonal relationships useful in the market. It is an investment in social connectedness
through which resources of other actors can be accessed and borrowed. Lin’s concept of social
capital has a more individualistic approach. Actors engage in interactions and networking in
order to produce benefits. Lin treats social capital as a social asset by virtue of actors’
connections and access to resources in the network or group of which they are members.
Robison et al. (2002) defines social capital as: “... a person’s or group’s sympathy toward
another person or group that may produce a potential benefit, advantage, and preferential
treatment for another person or group of persons beyond that expected in an exchange
relationships.” They argue that this definition contains the properties of classical capital and it
separates what it is (sympathy) from what it does (potential benefits) and focus on transformative
capacity of capital residing (embodied) in human relationships.
Major international organisations, particularly the Organisation for Economic
Cooperation and Development (OECD) and the World Bank have adopted their own definition.
The OECD (2001: 41) defines social capital as: “... networks together with shared norms, values,
and understandings that facilitate cooperation within or among groups.” The World Bank takes a
broader view and defines social capital as: “... the institutions, relationships, and norms that
shape the quality and quantity of a society’s social interactions. Social capital is not just the sum
of the institutions which underpin a society—it is the glue that holds them together” (World
Quibria (2003) reviewed different definitions and comments concluding that social
capital is an individual asset that comes from access to networks and social connections, whereas
others view it as a shared asset that resides in a homogenous collective entity—such as a
community with common interests and shared values. Some others have focused on trust and
tolerance, while others have focused on the degree of civic and social engagements as the vehicle
of such social capital. Still others have highlighted issues of culture and social norms.
Needless to say, adoption of social capital by social scientists from different background
has led to the multiple definitions. The variety of definition is not due to lack of understanding
about what social capital is, but it is due to various dimensions of social capital. Robison et al.
(2002) write that the differences in definition have arisen primarily because scientists have
included in the definition expressions of its possible uses, where it resides, and how its service
capacity can be changed; which the author argues should not be include in its definition. In his
view, social capital can be deconstructed into what it is, where it resides, what it produces (how
used), and how it produces. Nevertheless, the basic notion of those definitions falls within the
broad framework of Bourdieu who said that, “It’s not what you know but who you know that
matters.” There are voluminous literatures discussing definition and measurement of social
capital but none of them have come up with firm, non-disputable definition. There is still
considerable debate in the academic community about what refers to social capital and what its
major components are that makes it representative to all situations. Given its complex nature, it
is not surprising to see many definitions and also it is not reasonable to expect a universal
definition. Nevertheless, over time, the concept has been fine-tuned and there is commonality on
the meaning of social capital.
The set of definitions representing different view broadly agree with the view that the
basic foundation of social capital is the social relations that engenders individual and collective
benefits. Social capital is a multidimensional construct containing various forms and functions.
Encompassing different view, social capital can be regarded as a collective asset in the form of
social relations, shared norms, and trust that facilitate cooperation and collective action for
mutual benefits. It is a capital asset produced through actor’s investment, endowing investors to
use as credits by virtue of connections. Social relations are regarded as an asset of an
individual—a resource in the form of information and trust that actors can draw dawn once
accumulated. Availability of the capital allows achieving certain goals that would otherwise be
impossible in the absence of capital. Social relations vanish if not maintained; reciprocity decline
over time; and norms depend on regular communications (Coleman, 1990). This implies that the
actor’s investment strengthens and reinforces the capital while disinvestment leads to a decline
of the capital. Elements that are crucial to the definition and conceptualisation of social capital
can be grouped into three broad categories: social networks (of families, friends, communities,
and voluntary associations), norms of reciprocity (shared norms, values, and behaviours), and
trust (in other people and institutions). Specifically, social capital involves informal social
relations, memberships in social networks and groups, civic engagements (volunteering),
community and organisational participation (volunteering), trust in the people and institutions,
and norms of reciprocity. It is a collectively-owned resource generated through individuals’
shared norms, values, attitudes, and behaviours that produces mainly a positive influence on
Capital Debate of Social Capital
Bourdieu (1986) first introduced the capital metaphor of social capital by differentiating three
different forms of capital—human, cultural, and social. Since then the debate about ‘does social
capital qualify as capital’ is continuing. While some authors argue that social capital does not
uphold the main properties of classical capital theory and, hence, does not qualify as capital,
others sustain that most properties of social capital resemble to that of classical capital theory
and, hence, capitalisation of social capital is appropriate. Knowledge of the classical theory of
capital is prerequisite to contributing to the capital debate of social capital. The Marxist theory
defines capital as the goods produced when surplus value is appropriated from one class (labour)
for the benefit of other (capitalists). Mainstream economists define capital as physical assets
(buildings, machines, infrastructure land, etc.) or financial assets (liquid assets, bonds, etc) that
have the potential to produce goods and services. Classical capital, in this sense, is a surplus
value or commodity that can be used as a factor of production. The fundamental properties of
classical capital goods include it is a commodity that is tangible, can be owned, and can be
traded in the market. Besides, the capital stock is productive and can be used as investment for
future production, generating as a result of investment, durability, and depreciates from both use
and non-use (Schmid, 2000; Castle, 2002; Piazza-Georgi, 2002).
Social scientists, mainly sociologists, have redefined the classical theory of capital in
terms of neo-capital theories (human capital, cultural capital, institutional capital, and social
capital). The neo-capital theories borrow the original macro-level concept of capital from
Marxist theory and apply it to individual actors (Lin, 2001). The neo-capital theory argues that
every individual can make choices to generate capital and keep it for their own benefit.
Application at the individual level and recognition of the value of choice decision of each actor
are the two critical elements of neo-capital theory (Lin, 2001). The neo-capital theories recognise
the importance of intangible resources embedded in individual actors (qualities of labour and
social relations) that have the potential to produce goods and services. The capital metaphor of
social capital has a base on neo-capital theory.
Prominent theorists, such as Pierre Bourdieu, James Coleman, and Robert D. Putnam,
claim that social capital has similar (although intangible) properties to traditional forms of
capital; hence, the term ‘capital’ in social capital has analogous meanings with other forms of
capital. Coleman (1990) contends that, like other forms of capital, social capital is productive,
making possible the achievements of certain ends that in its absence would not be possible. But,
unlike other forms of capital, social capital inheres in the structures of relations between and
among actors. It is not lodged either in the actors themselves or in physical implements of
production. Putnam (1993) argues that, while physical capital refers to physical objects and
human capital refers to properties of individuals, social capital refers to connections among
individuals—their social networks, their norms of reciprocity, and the trust that arise from them.
OECD (2001) distinguishes social capital from human capital based on three perspectives. First,
social capital is embedded in relationships and therefore cannot be considered the exclusive
property of any specific individuals; second, it is the product of an investment of time and energy
but its benefits can profit individuals that did not participate in its making; and third, it has
positive externalities that affect the wider community so that costs and benefits of social relations
do not accrue only to the person building relationships, but to every individual that belongs to the
Not all social scientists accept the metaphor of capital to describe social relationships.
Several authors, primarily economists, have questioned and criticised the capitalisation of social
capital (see Baron and Hannon, 1994; Portes, 1998; Arrow, 2000; Solow, 2000; Hofferth et al.,
1999; Inkeles, 2000; Schmid, 2000; Fine, 2001; Bowles and Gintis, 2002; Durlauf, 2002; Harriss,
2002; Smith and Kulynych, 2002; Quirbia, 2003; Roberts, 2004; Halpern, 2005). They have
criticised the capitalisation of social capital on different grounds. Smith and Kulynych (2002)
believe that the meaning of capital is so broad and pervasive that it obscures its distinction and
consequently measurement. On the other hand, Inkeles (2000) thinks that use of term ‘capital’ is
too narrow and proposes more broad term like social resources. The term ‘community’ would be
more appropriate to social capital because it focuses attention on what groups do rather than
what people own (Bowles and Gintis, 2002). Social capital is not necessarily the best term, but
might just be a ‘social fabric’ (Halpern, 2005). Some authors criticise that social capital is neither
social, nor capital (Robison et al., 2002; Roberts, 2004).
Several authors have clearly pointed out the weaknesses of the analogy between physical
capital and social capital. Arrow (2000) argues that physical capital has three important
characteristics: extension in time, deliberate sacrifice in the present for future benefits, and
alienability (transfer of ownership from one person to another). To him, social capital shares only
the time dimension aspect with physical capital (for example, trust or reputation take some time
to develop); but it does not necessarily require any material sacrifice; in most cases, it is also
difficult to transfer the ownership of social capital from one person to another. Further, social
networks are maintained to provide other than economic benefits for actors. Conceptually social
capital, thus, fails to fulfil the properties of classical capital goods. In this sense, Arrow questions
the appropriateness of the term ‘capital’ to represent social relations and he discourages the use
of social capital terminology. Solow (2000) raises some measurement problems of social capital
and notes that, “... it is an attempt to gain conviction from a bad analogy.” He writes that while
physical capital can be measured and rate of return can be readily calculated by past investment
net of depreciation, such measurement is not straightforward for social capital. Besides, social
capital appreciates with use and traditional models are incapable of explaining the changes of
social capital over time. Hofferth et al. (1999) comments that social capital is the product of
altruism and, hence, it does not fulfil the basic characteristics of capital—resources built up
through investment and that can be drawn upon when needed. To qualify as ‘capital’ an entity
must possess an opportunity cost, but this is lacking in social capital (Baron and Hannon, 1994).
Social capital is not equally available to all, in much the same way that other forms of capital are
differently available. Geographic and social isolation limit access to this resource (Edwards and
Many authors criticise social capital in terms of its ownership. One major difference
between social capital and other forms of capital is that social capital resides in a social
relationship, whereas other forms of capital primarily resides in the individual alone (Robison et
al., 2002). Portes (1998) compares features of different forms of capital and comments that while
economic capital is in people’s bank accounts and human capital is insides their heads, social
capital inheres in the structure of their relationships. You can sell your privately-owned asset,
such as land, but you cannot sell your social relations, in which other individuals also have a
stake. Social capital is the only form of capital not under any individual’s complete ownership
(Yang, 2007). Moreover, unlike other forms of capital, actors cannot trade social capital in the
market but it is, instead, embedded within a group (Gant et al., 2002; Glaeser et al., 2002). Social
capital belongs to each member of a group and requires the actions of all involved to sustain it
(Wilson and Chiveralls, 2004). This suggests that the properties of social capital are similar to
those of neo-capital theory but not to those of classical capital theory. Economists agree that
social capital influences economic outcomes, but whether this influence can be or should be
meaningfully coded into a capital metaphor of social capital is a debatable issue (Quirbia, 2003).
Given these conceptual and measurement imprecisions, many economists feel reluctant to assign
capital metaphor to social capital.
On the other side of the coin, there are large numbers of prominent social scientists who
believe that social capital shares many commonalities with other forms of capital and, hence, we
can genuinely assign capital metaphor to social capital. The mushrooming of social capital
literature in past decade is a case in point. Robison et al. (2002) mentions that physical capital
posses properties of transformation capacity, durability, flexibility, substitutability, decay
(maintenance), reliability, the ability to create other capital, capacity for investment and
disinvestment, and alienability. Social capital shares most, if not all, of these capital-like
properties. Castle (1998) describes that capital in any form qualifies as capital only if it makes
humans more productive when they use it in combination with other forms of capital. Hofferth et
al. (1999) mentions that the outcomes of social capital are capital in nature, because capital is
something that is durable; retains its identity even after repeated use; and can be used up,
destroyed, maintained and improved. Both structural and cognitive forms of social capital posses
capital characteristics because they both require investment of time and effort, not always of
money (Grootaert and van Bastelaer, 2002). It may be regarded as a form of capital since it helps
to sustain income stream over time although in a much more dissipated manner than more
conventional forms of capital that are tied to specific outputs (Ville, 2004).
One of the key properties of capital is that it can be used as a factor of production. Social
capital directly enhances the factor productivity and, hence, it can be treated as capital (Dasgupta,
2000). Becker (1996) considers social capital as an intermediate good (commodities) for the
production of assets. Sabatini (2006) sustains that an increase in trust-based relations reduces the
average cost of transactions, just as an increase in physical capital reduces the average cost of
production. Social capital, thus, improves the capabilities of agents and constitutes an input in
production processes. Besides, he claims that it is possible to describe social capital as an input
of agent’s utility and production functions from a rational choice theory perspective. At the
aggregate level, social capital may influence the economic performance and the process of
development, providing credible explanation for growth differentials among regions with
endowments in other forms of capital (Guiso et al., 2004; Sabatini, 2006).
Social capital is a productive resource having varying quantities (stocks and flows) and
qualities (trust, reciprocity, norms, social networks, and information channels). It is a productive
resource and requires investment (Lin, 2001). It can generate positive externalities for group
members who gain competitive advantage in pursuing their ends (Sabatini, 2006). Evans and
Syrett (2007) argue that, like other forms of capital, social capital is productive and exists as a
stock of resources to which both individuals and groups have access. On the other hand, they
point out how social capital is different from other forms of capital: (i) it is intangible and
focuses around the social relations; (ii) the stock of social capital deplete if not used, but increase
with more use; (iii) a single person cannot own it exclusively; and (iv) its ownership cannot be
transferred into another individual. Evans contends that social capital does not require
expenditures of scarce material resources in its creation and its stock accumulates with use
instead of depreciating.
Some authors criticise social capital because it cannot be appropriated as the exclusive
property of single individual. The ownership of social capital is less relevant as it is thought to be
a property of a community or region as compared to others indicators, such as level of education,
health, and economic wealth (Lin, 2001). Some authors criticise social capital in the sense that it
does not depreciate with use. Addressing to this issue, Ostrom (2000) points out that social
capital need not depreciate with the way physical capital does. In important instances, making
use of social capital increases its stock available for future use. Holding social capital in an
analogous form of decay is misleading (Sobel, 2002). He argues that expanding social networks
indirectly increases other members’ social capital by giving them access to a larger network.
Some scholars criticise social capital that investment in social capital does not bring any
opportunity costs. Woolcock (1998) responds this comment by saying that while individuals do
not invest directly in a commodity social capital, they do often make calculated decisions to join
clubs, do favours, and make and maintain relationships with an expectation of future benefits.
Such deliberate decisions to increase their social capital bring certain opportunity costs.
Light and Gold (2000) identify two properties namely storability and transformability
that are common between social capital and other forms of capital. To him, social capital is the
only capital that can be accessed and accumulated by rich and poor alike. This is because
investing on it requires only time and energy, but not money. Social capital facilitates
transformation of individual capitals into material wealth which is available for rich and poor
Svendsen and Svendsen (2005) believe that social capital shares some common
properties of other forms of capital and, hence, it can be regarded as capital. Their argument is
that like physical, economic, or human capital, social capital can provide immediate benefits to
the individuals (in the form of information or help from friends). We can convert social capital
into other forms of capital (get a better job). We can also cultivate social capital in the hope of
future benefits, applying strategies modified by cultural codes. However, it is different from
other forms of capital in the sense that it cannot be exclusively owned by single individual and it
is prevailingly a non-excludable good. Social capital can benefit many actors at the same time
Lin (2001) defines social capital in relation to neo-capital theories, by separating it from
classical capital theory. Lin writes that premise behind the notion of social capital is the
investment in social relations with expected returns. People engaged in social networks can
derive certain benefits. To Lin, it is the members of the group who make maintenance and
reproduction of this social asset possible. Thus, it resembles the features of neo-capital theory.
Above discussion revealed argument for and against the appropriateness of the term
capital in social capital. To what extent social capital shares properties of other forms of capital
is crucial to consider it as capital. It appears that social capital is different in some properties
from other forms of capital, but it shares many common properties of other forms of capital. It
exhibits some similar characteristics to other kinds of capital in the sense that it can be put into
economic production functions, it is accumulated over time, and it significantly improves
economic performance (Fafchamps and Minten, 2002). Social capital is similar to other forms of
capital in the sense that it can be invested with expected future returns, is convertible, is
appropriable, and requires maintenance. The social relationships can be utilised as an economic
resource for the production of goods and services. Thus, social capital does have many properties
that qualify it as capital. The capitalisation of social capital is based on sufficient reasoning. It is
worth noting that it is the term capital that makes social capital attractive to such a wide range of
people bringing together of sociology and economics (Adam and Roncevic, 2003).
Types of Social Capital
Based on different characteristics and functions, literatures have classified social capital into
different groups. The most common forms of social capital in literature include structural and
cognitive social capital; bonding, bridging, and linking social capital; strong and weak social
capital; and horizontal and vertical social capital.
(a) Structural and cognitive social capital: Structural social capital is related to the pattern of
social networks and other structures such as associations, clubs, cultural groups, and
institutions supplemented by the rules, procedures, and precedents that govern them.
Cognitive social capital consists primarily of a set of shared norms, values, attitudes, and
beliefs of individuals relating to trust, reciprocity, and cooperation (Uphoff and
Wijayaratna, 2000). The objective and externally-observable structural social capital
facilitates mutually beneficial collective actions through established roles and durable
social networks supplemented by rules, procedures, and precedents (Uphoff, 2000; Hitt et
al., 2002). The structural social capital provides certain benefits to actors, like finding a
job, obtaining information, or accessing resources (Burt, 1992; Tsai and Ghoshal, 1998).
The subjective and intangible cognitive social capital predisposes people towards
mutually beneficial collective action through shared values and attitudes (Uphoff, 2000).
Putnam (1993) argues that participation in social networks and voluntary organisations
forms habits of cooperation, solidarity, and civic-mindedness. Besides, it fosters
development and spread of trust. Social capital is, thus, understood both as a structural
and a cognitive dimension (Paxton, 2002; Van Oorschot et al., 2006). These structural
and cognitive forms are often interconnected and reinforcing (Uphoff and Wijayaratna,
2000). This dual characteristic often creates problems in measuring social capital that
focus on one, but not both, dimensions.
(b) Bonding, bridging, and linking social capital: From a social cohesion perspective, recent
literature distinguishes social capital into three important forms (Putnam, 2000;
Woolcock, 2001). Bonding social capital denotes ties among people who are very close
and known to one another, such as immediate family, close friends, and neighbours.
Often people in bonding networks are alike on key personal characteristics (e.g., class,
race, ethnicity, education, age, religion, gender, and political affiliation). It is more
inward-looking, protective, and exercising close membership, and therefore good for
under-girding specific reciprocity and mobilising informal solidarity (Van Oorschot et al.,
2006). Bonding promotes communication and relationships necessary to pursue common
goals. Moreover, it influences creation and nurturing of community organisations, like
self-help groups and local association. Bridging social capital refers to more distant ties
of like persons, such as loose friendships and workmates. Often people in bridging
networks differ on key personal characteristics. Bridging is more outward-looking,
civically engaged, narrows the gap between different communities and exercising open
membership, and is, therefore, crucial to organising solidarity and pursuing common
goals (van Oorschot et al., 2006). Bridging is crucial for solving community problems
through helping people to know each other, building relationships, sharing information,
and mobilising community resources. Linking social capital refers to ties and networks
among individuals and groups who occupy very different social positions and power. It
reaches out to unlike people in dissimilar situations, such as those who are entirely
outside of the community. Linking social capital may involve networks and ties of a
particular community with states or other agencies. These different forms of social capital
can serve different functions. Bonding with closely-knit people can act as a social support
safety net; bridging ties with people across diverse social divides can provide links to
institutions and systems and enables people and communities to leverage a wide range of
resources than are available in the community. Bonding generates ingrown and thick trust
that is useful for ‘getting by’ in life, as opposed to the bridging of expansive and thin trust
that may be useful for ‘getting ahead’ (Anheier and Kendall, 2002; Woolcock, 2001). In
practice, social ties may constitute ‘bonding’ in one respect and ‘bridging’ in another.
This distinction is helpful to think about different types of social relationships among
people in the community and their likely differential outcomes (Field, 2003).
(c) Strong and weak ties: Granovetter (1985) distinguishes social capital according to the
strength of social ties. Strong ties refer to close, persistent, and binding relationships,
such as those that exist with families and close friend group; weak ties, on the other hand,
refers to more causal, temporary, and contingent relationships, such as those that exist
with people from different backgrounds and friends from different social niches. Strong
ties comes from affection, willingness to help, and great knowledge of each other. Strong
ties create great solidarity and offer personal support, whereas weak ties are used more
for informational support. Weak ties link people to the broader communities and to a
wider range of potential resources (Erickson, 2004). It can serve as channel in mobilising
resources, ideas, and information to promote collective actions in the community.
(d) Horizontal and vertical networks: Social capital is also distinguished between horizontal
and vertical networks (Woolcock and Narayan, 2000). Horizontal social capital refers to
lateral ties between people of similar status and power in a community, vertical social
capital on the other hand refers to ties between people of different hierarchy and unequal
power among people. While horizontal social capital operates through shared norms and
values, vertical social capital operates through formal hierarchical structures. Similar to
bonding and bridging, horizontal social capital encompasses diverse group of people and
it serves to establish connection and a common goal among community members through
civic engagement. Similar to linking, vertical social capital establishes link of citizens to
community leaders and decision makers, and creates environment for social change
through laws and policies.
The literature also identify several other types of social capital. For example, formal
(membership in clubs, social groups, and organisations) and informal (informal social connection
with extended family, friends, neighbours, and workmates) (Pichler and Wallace, 2007); and
open (civically-engaged and open membership) and closed (protective and exercising closed
membership) (Heffron, 2000). These different types, characteristics and functions of social
capital reveal some of the ways in which social capital differs. A thorough insight on these
varieties of forms of social capital is helpful in better conceptualisation and measurement of
social capital. These several forms of social capital also suggest that social capital can be
operationalised and measured in variety of ways.
Level of Analysis for Social Capital
Social capital is believed to exist at different hierarchy in the society. As a result, it can be
measured and analysed at different levels. From the levels of analysis perspective, existing
literatures on social capital can be classified into two groups: (a) individual and collective levels
and (b) micro-, meso-, and macro-levels.
(a) Individual and collective levels: There are divergent views regarding whether social
capital is an attribute of an individual (individual good) or an attribute of a community
(collective good). Some authors conceive social capital at the individual level, whereas
others conceive it at the society level1. Kilby (2002) writes that social capital exists
within levels or scales as one feels belonging to family, community, country, etc.
simultaneously. Contemplating similar views, Adler and Kwon (2002) argue that sources
of social capital lie in the social structure within which the actor is located. Social capital,
thus, has both an individual and an aggregate component (Slangen et al., 2004). The
foundation of social capital lies in the group, but it can be used by the group as a whole or
individuals within the group (Sander, 2002). Bourdieu (1986) views social capital at the
individual level and Coleman (1990) views social capital as the element of social
structure but he conceptualises social capital at the individual level. Putnam (1993) and
Fukuyama (1995) brought the macro and collective action notion of social capital and
viewed social capital at the collective level. Recent literature largely views social capital
as a societal level attribute, rather than an individual level attribute (Newton, 2001;
Glaeser et al., 2002). Nevertheless, the general consensus is that social capital is an
attribute of both an individual and a society.
Proponents of individual social capital (for example, Bourdieu, 1986; Becker,
1996; Lin, 2001; Flap, 2002; Glaeser et al., 2002; Erickson, 2004; Yang, 2007) view
social capital largely as an attribute of an individual. Individual social capital refers to a
person’s potential to activate and effectively mobilise a network of social connections
based on mutual recognition and maintained by symbolic and material exchanges
(Bourdieu, 1986). The basic premise behind the individual level capital is that it is an
1 See http://www.gnudung.com/literatures/levels.html for further details.
individual who creates, maintains, and subsequently gains advantage from social capital.
Moreover, the individual is the natural unit of observation and measurement of social
capital. According to Yang (2007), the soundness of individualising social capital comes
from the premise that it is individuals who employ social capital as a means for achieving
an end. To him, individual social capital emphasises the active roles of individuals, rather
than the constraining effects of social structures. Glaeser et al. (2002) identify three
dimensions of individual social capital: (i) it is an individual asset; (ii) some aspects of
this asset are intrinsic to an individual and some can be augmented by individual actions;
and (iii) it can be purposefully used to augment one’s market and non-market position.
The extent to which an individual has access to resources through social capital depends
on the person’s connections, the strength of these connections, and the resources
available to these connections (Sobel, 2002). A person’s ability to activate and effectively
mobilise social networks largely affects the generation of social capital. Social capital,
thus, represents an additional pool of resources for the individual, which an actor can
accumulate and use for his personal goal attainment (OECD, 2002). In this context, social
capital has the properties of the private good—personal goal attainment.
Proponents of collective social capital (for example, Granovetter, 1985; Putnam,
1993; Fukuyama, 1995; Newton, 2001; Bowles and Gintis, 2002; Van der Gaag and
Snijders, 2003) believe that social capital has not only an individual aspect, but also a
community aspect and define it mostly an attribute of a society. As an attribute of a
society, social capital refers to a quality of networks and relationship that enables
individuals to cooperate and act collectively (Putnam, 1993). Collective social capital
emphasises social capital as a collectively-produced and -owned good, from which the
whole community could benefit. It is looked at primarily in terms of its benefits to society
rather than the individual. It is seen as a macro-level good—a property of a group, a
community, or a nation as a whole. The premise behind the collective social capital is
that since social relations require two or more individuals to exist, it is not an individual
level capital. It resides between actors, as opposed to single actor and provides benefits to
all actors—individual and collective. Collective capital, thus, represents some
aggregation of valued resources of members interacting in networks. This means it
cannot only be treated as a characteristic of individuals and their relations, but also as
property of countries and regions (Van Oorschot et al., 2006). On the collective level,
social capital is often taken to be represented by norms, trust, and social cohesion. It is
the quality of networks and relationships (trust, norms, rule of law, etc.) that fosters
cooperation and collective action of individuals. In this sense, social capital has the
properties of a public good facilitating achievement of higher levels of efficiency and
productivity (OECD, 2002).
Social networks and social participation can be considered to be measuring
individual level attributes, while trust and shared norms are more closely related to
societal level attributes. In this sense, social capital consists of both individual and
collective goods, whereby institutionalised social relations with embedded resources can
benefit both the society and the individuals in the society (Portes, 1998; Lin, 2001;
Paxton, 2002). While it is true that social capital exists because of the connections
between actors and not within the actors themselves, it is in fact the actor who accrues
benefits from networking—possibly the whole network (Svendsen and Svendsen, 2005).
Normally, both individuals and groups can obtain future gains from investment in social
capital (Svendsen and Svendsen, 2005). Therefore, measurement of social capital
involves phenomena on both the individual and community levels. Some authors
conceptualise individual and collective social capital in terms of private and public good
(see Aldridge et al., 2002).
(b) Micro- meso-, and macro-level: Some authors generalise the individual and collective
level social capital approach and analyse social capital at multiple levels: micro, meso,
and macro (Turner, 2000; Chen, 2005). Social capital, at the micro level, looks at
relationships between individuals, households, and neighbourhoods; at the meso level, it
focuses on communities, groups, institutions, and organisations; and at the macro level, it
focuses on the forms of institutional and political environment in nations or states
(Bourdieu, 1986; Grootaert and van Bastelaert, 2001). This means that the micro level
refers to relations between individuals, the meso level refers to relations between groups
or firms, and the macro level refers to relations between regions or nations. Halpern
(2005) distinguishes micro, meso, and macro social capital as the social relations among
people at the individual, community, and societal levels, respectively. While the micro
level looks at social capital as an individual asset and the macro level looks at social
capital as a collective asset; the meso levels looks at social capital as an individual asset,
as well as a collective asset.
Micro social capital involves norms, values, and networks of horizontal
relationships among individuals, households and neighbours, and which facilitate
interactions among these actors. Meso social capital involves networks of vertical
relationships and networks of associations that facilitate interactions among groups,
communities, firms, and NGOs. Macro social capital involves the formalised institutional
relationships and structures that govern the political regime, civil society, the rule of law,
and government (Hopkins, 2002; Bjornskov and Svendsen, 2003). This means, the micro-
approach emphasises the nature and forms of cooperative behaviour; the macro-approach
focuses on the conditions (favourable or unfavourable) for cooperation; and the meso-
approach highlights structures that enable cooperation to take place (PRI, 2005). The
Policy Research Initiative (PRI) argues that the micro-approach focuses on the value of
collective action, the meso-approach focuses on the structure that enables cooperation,
and the macro-approach focuses on the value of integration and social cohesion. This
implies that social capital can be measured and analysed at various levels. Basically, this
hierarchical distinction of social capital is a combination of cognitive (micro), structural
(meso), and institutional (macro) aspects of social capital. Social capital, thus, operates,
either individually or collectively, at various levels and each level produces different
outcomes and has different implications for public policy.
Social structures, cultural norms and values, and institutions affect economic behaviour through
multiple direct and indirect channels and, hence, they are critical in understanding sustainable
economic development. Successful explanation of economic development, thus, has to transcend
beyond narrow measures of mere income growth to encompass social, cultural, and political
variables. In the past, mainstream economic models focused primarily on standard factors of
production and they largely ignored the socio-cultural dimensions. As a result economic
development ended up with low welfare improvement and high social problems; economic
models also proved to be deficient in explaining development outcomes fully. This led to re-
orientation of development approach placing emphasis on social norms, values, beliefs, and
institutions. As a result human capital, institutions, and currently social capital became important
elements of economic models. The role of social capital in overall development process came
into light in 1990s and its importance in explaining economic and social phenomena has been
increasing felt thereafter. Social scientists have been using the concept as an important
determinant of economic behaviour. The interest on social capital is overwhelming and the
literature on theoretical and empirical aspects of social capital grew significantly during the last
The idea of social capital can be traced long back but its entry into academic and policy
debates can be credited to the pioneering work of Pierre Bourdieu (1986), James Coleman (1988)
and Robert Putnam (1993). Broadly, social capital can be defined as a collective asset in the form
of shared norms, trust, networks, social relations, and institution that facilitate cooperation and
collective action for mutual benefits. Social capital is a complex multidimensional concept
having various dimensions, types, levels and determinants, and varieties of definitions exist
depending on the discipline and interest. Nevertheless, most definitions emphasise the role of
social relations in generating benefits for individual and society as a whole. The critical elements
of social capital include social networks (families, friends, communities, and voluntary
associations), norms of reciprocity (shared norms, values, and behaviours), and trust (people and
institutions). It is collectively-owned capital generated through individuals’ shared norms, values,
attitudes, and behaviours that positively benefits economic development. The most common
forms of social capital include structural and cognitive social capital; bridging, bonding, and
linking social capital; strong and weak ties; and horizontal and vertical social capital. Social
capital can be measured at individual and collective level as well as at the micro-, meso-, and
macro-levels. These different forms and level of analysis suggest that social capital can be
defined, operationalised, and measured in different ways.
The use of term ‘capital’ in social capital is a highly controversial issue. Some
economists criticise the capitalisation of social capital in the sense that it lacks many of the basic
properties of classical capital and, hence, it does not qualify as capital. On the other hand, many
social scientists argue that although social capital lacks some basic properties of classical capital,
it shares many important properties of classical capital and, hence, it qualifies as capital. It can
be argued that the properties of social capital, such as it can be put into production function, can
accumulate over time, is capable of improving economic performance, can be invested with
expected future returns, is convertible, is appropriable, and requires maintenance; this makes it
qualify as one form of capital. The social relationships can be used as an economic resource for
the production of goods and services. Given the high significance of social capital in explaining
economic and social phenomena, it is of less value to spend resources on ‘capital’ debate.
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