Friday, May 26, 2006

Is Social Capital Really Capital?

The demanding Manager asked me to serve this drink in the cafe. She doesn't like the idea of moonlighting --including, even, serving my own drink at home. So here it is (cross-posted at here, with minor modification)

This is, of course, a fiction, in response to previous fellow host's posting:
Once upon a time an economist had been confused. He found two countries, Banana Republic and Togog Republic, have similar resources, endowment, size, economic structure, political system, etc --in short, they're almost identical, like twin. Yet he also learned that Togog Rep. grew so well, Banana didn't.

Having frustated to find the secret of Togog Rep., he went to entertain himself playing bowling. His bowling mate is an anthropologist who incidentally was reading Bourdieau (1986) for his ethnography work on the Mighty Maridjan case in Mt. Merapi Central Java.

The economist, while waiting his turn, read that book and encountered the term social capital. A light-bulb flashed in his head. He said to himself: "Voila, this is the answer. Togog Rep. had higher social capital".

He started writing, and to make it catchy and relevant to his readers --they don't have Maridjan's fortuneteller game-- he put a title with something related to bowling. It turns out everyone seems love the idea.
Except this crazy guy from Salemba, I, who ask how to have reliable social capital measurement, and more importantly, whether this social capital is similar to old definition of capital, that is, subject to diminishing return, reproduce-able (through investment), and has various rates of return (and what determine this return).


  1. According to Michael Woolcock, World Bank's Senior Social Scientist and KSG professor, "raising the social capital concept is our (sociologists) attempt to raise the attention of our economists colleague..."

    Before you sociologists get mad with this statement, he meant in the scope of economist-led institutions like the Bank.

  2. On the measurement of social capital: if we follow Putnam's classical definition, it is the participation in civic activities like this association, that association, this caucus, that causus etc.

    For Indonesia, one of the proxy can be participation in Siskamling, Posyandu, PKK, LKMD, gotong-royong etc. Other measure is informal community activity like "arisan." These information are available in data set like IFLS. There have been a number of paper using these measurements.

    I just finished writing a paper using such information -- wait until it is posted! Not that the coefficients are significant. But it is more on how we can use the data.

    A more sophisticated measurement is data on social network. We will need the structure of the data set such that we can see that A is linked to B, C, D and so on.

    Not direclty related to the discussion, but these papers use such data structure:
    Sacerdote (2000), Miguel and Kremer (2003).

  3. i had nasty discussion with someone who was furious on the way economists treat social spending as consumptions, not investment. i was caught off-guard while he happily ransacked me with his ground-work foundings. yes, i never shared my parts working with KUD et all. my bad, i found it easier to be a cash-and-carry slut.

    so, i am expecting you guys -who have more data and research on hands- to battle this fight for me. i will gladly refer the posting(s) to him. eventhough you, yes you, i know you are reading this too. care to say anything yet?


  4. Jeng Detta, which side do you want me (us) to fight for you? But maybe Vijayendra Rao (2001) can help you. She found that spending for celebrations in rural South Indian villages are not just spending. They are 'social investments.'

    But you're right. We should not be skeptical to participation and contribution in arisan, LKMD, KUD, Posyandu etc. However, the result of my paper was ambiguous. Community participation helps. But the 1998-99 crisis may be too big in magnitude so it outweighted the benefit from participation.

    Don't worry about the economists. As long as we still have the graduates of a "school of government"... :-)

  5. I was going to comment on this but a.p.'s post and Aco's comment beat me to it. Rizal raised a question that I feel never really was answered by a.p.: is social capital really a capital? We do know what variables economists have been trying to use as a proxy for social capital. But are we supposed to be convinced that those things really measure what we want to measure?

    Another way to ask Rizal question may be: is social capital a real deal or is just a fad? Which is sort of what Sobel was asking in his 2002 JEL paper (also discussed by Aco in this posting). Four years on, I think much of Sobel's criticism are still unanswered.

  6. you may want to take a look at