Social capital, a term that dates back over 80 years, is a vitally important resource to our communities, and the evidence suggests that we have far lower stocks of social capital than we did a generation ago.

Social capital refers to the reservoir of resources available to individuals because they are embedded in particular social networks and are members of a particular community and society. Networks arevaluable because information (like job leads, or health information, or information about who is trustworthy) flows through them and because they serve as the foundation for an expectation of reciprocity. Social capital in a community is useful for creating a shared level of social trust, friendly and safe neighborhoods, vibrant and well-functioning public places, and strong participatory government.

Social and political theorists, beginning with Alexis de Tocqueville, have seen the strength of voluntary associations, a key indicator of social capital, as the keystone of a well functioning democracy. Today, a growing school of economists believe that a community’s prosperity depends more upon its social capital than on any other factor.

The inclusion of the word capital in social capital invokes other more familiar forms of “capital”—a stock of value from which benefits flow. Our ties and memberships are our social capital, just as our savings are our financial capital, our machines and tools are our physical capital, and our knowledge and skills are our human capital. Social capital may be harder to measure than these other types of capital, but all of them are to some extent abstractions. For example, a factory’s value as physical capital can be measured through its stock price, what it makes, the current and future prices of the products it produces, the age of its physical equipment, etc.

Social capital’s value lies in our collective sets of interpersonal ties. The value of these ties, like the factory’s value, depends upon their use and potential future use. As with physical capital, we need to invest in our social capital, to build new ties and spend time maintaining old ones.

Fortunately, unlike physical capital, social capital is in some ways self-replicating. By repeatedly creating trust in relationships with particular people, we come to trust all people more (in ways we only just discovering), and this social trust makes it easier to make still more new ties. It is as if the machine produced its own parts, and at lower prices. This big idea is the key to the magic of social capital: that particular and local acts magnified over time and across individuals can change whole communities and societies.

Read more about the history of social capital here.

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