What is the value of social capital?

Social capital is social relations that have productive benefits. The best way to understand social capital is through the old adage, “it’s not what you know, but who you know”.

We intuitively understand that we can derive benefits from our relationships with others, whether it be as simple as finding a reliable mechanic (which can save you money), or borrowing a cup of sugar (which can save you time), or finding a new job or client (which can make you money).

Social capital has been described by some authors as lubricating the fabric of society, and allowing modern economies to function efficiently.

It saves people time, money, can help to avoid mishaps and accidents, can make things easier, and can allow people to come up with new ideas and make new connections that would have otherwise not been possible.

It is best to think about the value of the consequences of social capital rather than the value of social capital itself. So this is specific to the context and time frame of interest.

Value of social capital

Social capital is best valued by the people involved in the context in question because different people in different contexts will place different values on different aspects of social capital. For example a farmer may benefit most from feelings of reciprocity – sharing equipment, information, etc. while a builder may benefit most from people helping them with introductions to good suppliers.

A person or group or organization can identify or measure the value of social capital by identifying what factors are important to them and give them the most benefits. This will not result in a single number, but rather in a checklist of social relations and actions to improve.

There is no doubt that social capital is universally important, but some people need more or can benefit more from the social capital they have. In fact some people in certain professions or social groups have more social capital than others.

Consider the role of a real estate agent. They have the potential to have contact with hundreds of people from diverse backgrounds, and by simply doing their job can build reciprocity with these people and they stand to benefit significantly from this social capital (if the relationship is maintained).

So clearly with an awareness of social capital someone can significantly improve his or her own social capital.

Similarly, social capital is often required (or beneficial) to be able to do a job, for example a project manager or a promoter – they can access contacts and potentially ‘favours’, and benefit from existing trust or sense of belonging that allow them to do their jobs better.

Unfortunately the value of some peoples’ social capital is low because of the nature of the social relationships they have.

Relationships with people who have little to offer or only similar things to you, represent lower value for obvious reasons. The most beneficial types of relationships are with people from different social circles and people who have positive things to offer – high income, good education, people who are socially well connected, people who have good local knowledge, etc.

Some people don’t have much social capital because they don’t know the right people.

Your social capital is a function of your five closest friends social capital (especially where they hold most of their social capital with people you don’t know).

Social capital is massively important and when built and used correctly can make a very big difference to your quality of life. It can save you money, make you money, get you a better job, make things easier and safer, it can save you time and effort, and make life more enjoyable and productive.

Using social capital

I think there is an improper way to utilise social capital – that is by asking favours without thought of giving in return. Giving can be as easy as sharing information or just listening to some ones problem.

If your focus is on giving, sharing and developing relationships and maintaining them long term then the benefits from that social capital will flow.

Banking on social capital

The value of social capital can certainly grow over time, but not without some continued investment. Most people would do more for an old friend or contact than for someone they just met, but having a long ongoing relationship is of course best.

This means that relationships need to be maintained and the more repeat interaction you have the better and stronger the relationship gets so the more trust and reciprocity the actors will feel towards the other.

It is possible to ‘spend’ social capital and thereby build it because ‘spending’ social capital is a social interaction and if it is a positive experience for both parties then social capital is built.

If one or both parties feel that they have been used or taken advantage of then social capital is lost and this can represent irreversible damage.