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Social capital: Reviewing the concept and its policy implications

Commission research paper

This paper was released on 25 July 2003.

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  • Key points
  • Media release
  • Contents

Social capital is an evolving concept. It relates to the social norms, networks and trust that facilitate cooperation within or between groups.

Social capital can generate benefits to society by reducing transaction costs, promoting cooperative behaviour, diffusing knowledge and innovations, and through enhancements to personal well-being and associated spill-overs.

Some aspects of social capital can have adverse effects, such as when strong internal group cohesion is associated with intolerance of others.

Governments already undertake many functions that implicitly aim to support or enhance social capital. However, some government programs and regulations risk inadvertently eroding social capital.

Whereas devising policies to create social capital generally is problematic, governments should at least consider the scope for modifying policies that are found to damage social capital, and ways of harnessing existing social capital to deliver programs more effectively.

At present, there is limited understanding of social capital and how different policies interact with it, and measurement is difficult. Further research, coupled with small-scale policy experimentation, may be warranted to provide better knowledge and tools for incorporating social capital considerations in policy analysis where appropriate.

There is scope for Governments to take more account of social capital in policy development, according to a Productivity Commission study.

The study — Social Capital: Reviewing the Concept and its Policy Implications — reports evidence confirming that social capital generally brings economic as well as social benefits, while noting that it can sometimes have perverse effects.

The Commission's review indicates that high levels of trust and social engagement can generate wide ranging benefits, such as reduced need for personal security and policing, improved workplace efficiency and lower costs of doing business.

The Commission said that governments should consider ways of harnessing and enhancing social capital to deliver programs more effectively.

The study also identified areas of government policy, including public liability laws, certain labour market regulations, and bureaucratic controls on community groups and events, where there is potential to erode social capital. Governments should examine the scope for modifying policies and regulations that are found to have such effects.

Commission Chairman, Gary Banks, observed 'The available evidence tells us that while some Government actions can undermine social capital, it is much harder for Governments to create or rebuild it.'

The Commission warned against the simplistic use of the social capital concept, arguing that the concept is evolving, difficult to measure, and that its practical policy implications remain unsettled.

Cover, Copyright, Foreword, Acknowledgments, Contents, Abbreviations

Key Points, Overview

1 Introduction
1.1 The interface between social capital and public policy
1.2 The Commission's interest in social capital
1.3 About this paper

2 The conceptual literature on social capital
2.1 Definitions and treatments
2.2 Key features: norms, networks and trust
2.3 Sources and determinants
2.4 Positive impacts
2.5 Negative impacts
2.6 Summing-up

3 The empirical evidence on social capital
3.1 Measuring social capital
3.2 Estimating effects
3.3 General limitations of the empirical studies
3.4 Recent research developments
3.5 Summing-up

4 Social capital and policy analysis
4.1 Assessing policies to build or support social capital
4.2 Incorporating social capital considerations into other policy assessments
4.3 Redesigning policies to harness existing social capital
4.4 Summing-up

A Some policy ideas aimed at enhancing social capital
A.1 Specific policy ideas
A.2 The general role of government


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