Social capital refers to the resources available to people and entities because of their networks. The assets we possess by virtue of the social relations that we develop and maintain, and the shared values which arise from those networks, make up social capital.
The term should not be confused with Social Currency, which is the total economic value of each consumer’s, customer’s, individual’s, or entity’s relationships, both online and offline.
Social capital includes the network of relationships not only between people, but also groups and entities. The term is used in several different ways in the fields of anthropology (the study of humankind), sociology and economics.
Humans create connections with other humans, and those connections are used in several ways. They can generate friendships and a great deal of happiness. However, the focus of social capital is on how social relations help us accomplish and produce things. They are a pathway to valuable assets.
“Social capital is not just the sum of the institutions which underpin a society – it is the glue that holds them together.” (World Bank)
Definitions of social capital vary, depending on which discipline it is being viewed from. However, according to the UK’s Office for National Statistics, the main aspects include social networks, civic participation, neighborliness, and citizenship.
Human capital looks at a person’s IQ, qualifications, skills, experience, etc. that he or she brings to an organization. Social capital looks at how that person, or how that human capital interacts in the larger marketplace (other people, teams, networks).
The Harvard Kennedy School of Government says the central premise of social capital is that human networks have value. Social capital is the collective value of all these networks (who people know), and the tendency that arises from these networks to do things with and for each other (norms of reciprocity).
Social capital offers advantages to individuals
For example, two individuals who went to Harvard Business School tend to feel connected with each other, because they met and interacted on campus, created friendships, and also have an institution in common.
Two adults who studied at the same university are more likely to connect more closely because they share social capital, which can translate into advantages for either one or both of them.
Social capital may take a number of different forms, from colleagues who work for the same employer, residents of the same neighborhood, and groups of friends who are part of a network.
People who share social capital tend to rely on and trust each other more when they have a need.
The OECD (Organization for Economic Co-operation and Development) says the following about social capital:
“We can think of social capital as the links, shared values and understandings in society that enable individuals and groups to trust each other and so work together.”
According to a number of studies, higher levels of social capital are linked to greater educational achievement, better health, improved employment outcomes, and lower crime rates.
In other words, people with extensive networks are more likely to be “housed, healthy, hired and happy.” These are all areas of concern to both lawmakers and community members alike.
The Institute for Social Research at the University of Michigan says regarding social capital:
“Social capital, however, is more than simply having social connections and networks. Social capital is exhibited in individuals who have a well-developed sense of mutual trust and “give-and-take” or “reciprocity” in their social networks. Moreover, it is exhibited in individuals who are actively engaged in civic and political life. This trust, reciprocity, and civic and political engagement then enriches the communities where these individuals reside.”
Examples of social capital in action
– When your neighbors informally keep an eye on your home while you are away on vacation.
– When members of a tightly knit community of Hassidic Jews buy and sell diamonds without having to check each gem for purity.
– E-mail exchanges among members of a diabetes support group.
– When all the firefighters in a city contribute funds towards the widow and children of one of their colleagues who recently died while doing his duty.
– The way Freemasons allegedly help each other advance in their businesses and careers.
Video – What is social capital?
Professor Karen Stephenson explains the concept of social capital and its relationship with human capital.