Social capital
Topic: Human Capital: Education, Health and Demographic Dividend · NCERT: Beyond NCERT
Meaning
Social capital is the networks, trust and shared norms (common rules of behaviour) in a society that help people cooperate and act together. Political scientist Robert Putnam made the idea well known. It matters because it lowers transaction costs, which are the costs of finding partners, making contracts and enforcing agreements. Where trust is high, people can trade, lend and work together more cheaply and easily. It is a third form of capital, alongside physical capital and human capital.
Example
In a village self-help group, women lend to one another on trust. They need no collateral (property pledged as security for a loan), because members know each other and group pressure makes sure loans are repaid.
Don't confuse with
- Human capital: human capital is the skills and health held by an individual. Social capital lies in the relationships between people and cannot be owned by one person.