The Cheap Side of Social Capital: Part 1

Abstract

Important social capital definitions focus on relationships, how people are connected. Relationships depend on commonalities, what people share. Commonalities may be earned or inherited and include shared emotions. Empathy is an important shared emotion because it enable s us to internalize each other’s well-being, the motivation for important economic outcomes. This article supports the definition of social capital as the empathy one person or group has another person or group, the object(s) of their social capital. Because Adam Smith emphasized the importance of sympathy (what we now call empathy), we recognize him as contributing to the social capital definition supported here. Members of social capital - rich networks, compared to nonmembers, are more likely to produce and exchange relational goods (intangible signals that satisfy our socio-emotional needs). They are also more likely to exchange commodities (things that satisfy our physical needs) on preferential terms, more likely to cooperate, more likely to invest in public goods, more likely to support institutions, more likely to enjoy equal commodities incomes, more likely to limit negative externalities, and more likely to be happy. Social capital, however, has a dark side. It is that the benefits enjoyed by members of social capital - rich networks are often denied or not available to network nonmembers. The disadvantages of being excluded from social capital networks can sometimes lead nonmembers to develop antipathy toward social capital network members. The antipathy one person or group has for another person or group is defined here as negative social capital. Negative social capital working alone is of little consequence. However, when nonmembers of social capital network share negative social capital toward the same object, they may develop cheap social capital relationships and cheap social capital networks that have influence. Motivations for creating cheap social capital networks include resentment, envy, real or imagined threats, and lack of commonalities. We call cheap social capital networks cheap because they are inexpensive to create, inexpensive to maintain, and produce inferior (cheap) products compared to those produced in social capital networks. Finally, cheap social capital networks are ubiquitous They can be found in social, business, sports, entertainment, religious, and science. Future investigations should also focus on discovering the conditions that lead to the formation of cheap social capital networks and what measures can be adopted to impede and mitigate their costly consequences.