The empirics of social capital and economic development: A critical perspective

From a theoretical point of view, modern political economy has developed by depriving economic interactions of their social content. A typical example of this trend is given by the economy’s working framework implied by Walrasian general equilibrium models. In this context, market interactions are reduced to the transmission of coded information through the auctioneer’s agency. Agents never meet: they simply pass on to the auctioneer their purchase and selling proposals (Gui 2002). However, the economic activity is deeply embedded in the social structure, and agents’ decisions are always influenced by a wide range of social and cultural factors. For example, most case studies show that enterprises devote an ever more relevant part of their financial resources to activities which are not directly related to production processes. Nurturing a co-operative climate inside the workforce and building trustworthy relationships with external partners generally constitute key tasks for management. On the other side, workers’ satisfaction is ever more affected by the quality of human relationships among colleagues, and not only by traditional factors like wage and job conditions. According to Gui (2000), such relational assets contribute to firms’ economic performance just like new machinery and warehouses. Growing attention has thus been devoted to the role that social norms, the diffusion of trust and logics of reciprocity play in shaping different kinds of transactions (Kahneman and Tversky 1979; Arnott and Stiglitz 1991; Berg et al. 1995; Fehr et al. 1997; Frey 1997; Fehr and Gatcher 2000; Sugden 2000). The growth literature is now pervaded by studies addressing the relationship between the economy’s social and institutional fabric, the economic performance and development patterns (Kormendi and Meguire 1985; Barro 1996; Bénabou 1996; Collier and Gunning 1997; Knack and Keefer 1997; Temple and Johnson 1998; Whiteley 2000; Zak and Knack 2001; Gradstein and Justman 2002). Such voluminous strands of the literature may be interpreted as the sign of the emerging need to fill the gap that, in economics, still separates society from the economy.