Benefits and Importance of Social Capital

The importance of social capital theory is apparent from the literature with many empirical studies that purport to show the importance of social capital to a very wide-ranging set of socioeconomic phenomena (Durlauf 2002a^[1]; Krishna 2001^[2]). Adam and Roncevic (2003, p. 177^[3]) stated that:

‘despite problems with its definition as well as its operationalization, and despite its (almost) metaphorical character, social capital has facilitated a series of very important empirical investigations and theoretical debates which have stimulated reconsideration of the significance of human relations, of networks, of organizational forms for the quality of life and of developmental performance’.

The widespread interest in and application of the concept could suggest the theoretical importance of social capital theory. Existing studies have provided ample evidence of its pervasiveness and offered useful impressions of its political, economic and social influence (Fine 2001^[4]; Jack and Jordan 1999^[5]; Montgomery 2000^[6]). Aldridge, Halpern et al (2002)^[7] cautioned that some of the empirical evidence on the importance of social capital for economic and social outcomes needs to be treated with caution because of the mis-specification or ambiguity of equations or models used to estimate its impact. Without a rigorous method for measurement it is unclear how the benefits are ascertained and tested. It is surprising that there is little skepticism in the literature over the validity of the purported benefits of social capital given the uncertainty of measurement techniques identified above. This is due to two factors: the intrinsic appeal of the concept; and the common misguided faith in measurement methodologies. The majority of benefits described in the literature have not been empirically tested at all but arise through theoretical extrapolation based on other concepts.

Requena (2003) suggested that the importance of social capital lies in that it brings together several important sociological concepts such as social support, integration and social cohesion. This view is supported by Rothstein (2003)^[8] who stated that the real strength of social capital theory is the combination of macro-sociological historical structures with micro-level causal mechanisms, a rare feature in the social sciences.

The literature recognizes social capital as important to the efficient functioning of modern economies, and stable liberal democracy (Fukuyama 2001^[9]; Kenworthy 1997^[10]), as an important base for cooperation across sector and power differences, and an important product of such cooperation (Brown and Ashman 1996^[11]), and Lyon (2000)^[12] described the importance of social capital in shaping regional development patterns. It is clear that social capital is of importance in societal wellbeing. Some aspects of the concept, such as inter-personal trust, are clearly desirable in themselves while other aspects are more instrumental (Bankston and Zhou 2002^[13]). Optimism, satisfaction with life, perceptions of government institutions and political involvement all stem from the fundamental dimensions of social capital (Narayan and Cassidy 2001).

Social capital is charged with a range of potential beneficial effects including: facilitation of higher levels of, and growth in, gross domestic product (GDP); facilitation of more efficient functioning of labor markets; lower levels of crime; and improvements in the effectiveness of institutions of government (Aldridge et al. 2002^[14]; Halpern 2001^[15]; Kawachi et al. 1999b^[16]; Putnam et al. 1993^[17]). Social capital is an important variable in educational attainment (Aldridge et al. 2002; Israel et al. 2001^[18]), public health (Coulthard et al. 2001^[19]; Subramanian et al. 2003^[20]), community governance, and economic problems (Bowles and Gintis 2002^[21]), and is also an important element in production (Day 2002^[22]). Economic and business performance at both the national and sub-national level is also affected by social capital (Aldridge et al. 2002). Others have emphasized the importance of social capital for problem solving and how only certain types of social capital contribute to this (Boyte, 1995^[23]; Sirianni & Friedland, 1997^[24]).

• Dimensions of Social Capital Theory
• Levels at Which Social Capital is Located
• Types of Social Capital
• Determinants of Social Capital
• Benefits and Importance of Social Capital
• Disadvantages, Downsides of Social Capital