How can you improve economic performance with social capital and trust?

1 What is social capital and trust?

Social capital and trust are closely related concepts that measure the social cohesion and cooperation in a society. Social capital is the collective value of the social networks and norms that facilitate collective action and mutual support among people. Trust is the degree of confidence and expectation that people have in the honesty, reliability, and competence of others. Both social capital and trust can be measured at different levels, such as individual, group, organizational, or institutional.

2 Why do social capital and trust matter for economic performance?

Social capital and trust can have positive effects on economic performance by reducing transaction costs, increasing information flows, enhancing innovation, fostering entrepreneurship, and improving governance. For example, when people trust each other, they are more likely to engage in trade, exchange ideas, collaborate, and invest. When people share common values and norms, they are more likely to cooperate, coordinate, and comply with rules and regulations. When people have access to diverse and dense social networks, they are more likely to access resources, opportunities, and support.

3 How can you measure social capital and trust?

There are different ways to measure social capital and trust, depending on the level and dimension of analysis. Some common indicators are the number and diversity of social ties, the frequency and quality of social interactions, the degree of civic participation and volunteerism, the level of generalized and specific trust, and the perception of corruption and fairness. These indicators can be collected from surveys, administrative data, experiments, or social media platforms.

4 How can you improve social capital and trust?

Improving social capital and trust is a complex task, as it depends on the historical, cultural, and institutional context of each society. Nevertheless, some strategies that can help include promoting social inclusion and diversity, strengthening civic education and engagement, building social infrastructure and spaces, supporting social innovation and entrepreneurship, and enhancing transparency and accountability. These strategies could involve equal access and representation of different groups in social, economic, and political spheres; fostering a culture of dialogue, deliberation, and participation; creating and maintaining physical and virtual platforms; facilitating and rewarding initiatives that address social problems; and improving the quality and availability of information.

5 What are the challenges and risks of social capital and trust?

Social capital and trust can have both beneficial and negative effects on economic performance. For instance, they can create social closure and exclusion, enabling opportunism and corruption, hindering adaptation and innovation, and generating complacency and inertia. Thus, it is essential to balance and monitor the quantity and quality of social capital and trust, as well as to address any trade-offs or challenges that they may present for economic performance.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?