Abstract
There is an unhelpful vagueness in the meaning of social capital. While this article does not provide a definitive interpretation of this important concept, after examining a representative sample of various usages—including the contributions of Becker, Coleman, Jacobs, and Putnam—it offers an interpretation of social capital, emphasizing the emergent character of norms and networks in public space, which is germane to the understanding of the entrepreneurially driven market process.
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Notes
It is interesting to note that, subject to the limitations of constrained maximization, Becker and Murphy’s formulation may be useful for modeling the way that social pressure can influence individual voting or how collective action can modify a pubic chooser’s ideological preferences. This may be a way of modeling some of the changes in ideological preferences that is discussed in Ikeda (1997).
This is perhaps a more colorful version of the Jewish law of chesed, a commandment to bury those dead who have no one to bury them (Seligman 1997: 81).
Although Jacobs did devote and entire chapter of her book (Jacobs 1961: 112–140) to political and collective action. It is in this chapter that she introduces the term “social capital” (ibid: 138).
For another Austrian perspective on these issues, see Chamlee-Wright (2008).
Later, I will distinguish between dependency of this kind that is based on knowledge or confidence and that is based on faith or trust.
In this sense, there is no such thing as trust in a well-functioning market, only confidence of one degree or another. Things may be different when the market, for whatever reason, begins to work less effectively and confidence wanes.
Note that life in a given private space, e.g., the home or business, in the public space of a relatively open society may be considerably less tolerant than the private space in a more closed society. My focus in this paper is on public space.
However, the price of real estate in a particular location includes the social capital in the neighborhood that makes it safe or unsafe, lively or dead. Hence, the real-estate mantra: location, location, and location.
I regard trust, understood as I explain below, as a fundamental category of human action. Entrepreneurship, i.e., action in the face of radical ignorance, presupposes trust.
It is no accident, as Peter Hall (1998) and Henri Pirenne (2003[1925]) document, that the re-emergence of cities in Western civilization preceded capitalism and the market process. I might add that the ideas of economic freedom, individualism, tolerance, meliorism, prosperity, science and technology, entrepreneurship, the concept of the artist, the symphonic form, and the novel are creatures of life in the city.
The distinction between trust and confidence, in the way it is used here, I would argue is essentially the same as Russell Hardin’s (2002: 7–13) distinction between what may be called “behavioral trust” (trust) and “cognitive trust” (confidence).
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Acknowledgments
I would like to thank the Earhart Foundation, the Institute of Economic Affairs, and Purchase College, SUNY for enabling me to write this paper while on sabbatical in London. Mark Pennington, John Meadowcroft, Paul Lewis, and Gene Callahan provided extensive comments. The usual caveat applies.
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Ikeda, S. The meaning of “social capital” as it relates to the market process. Rev Austrian Econ 21, 167–182 (2008). https://doi.org/10.1007/s11138-007-0037-x
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DOI: https://doi.org/10.1007/s11138-007-0037-x