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(Essay 3) What is social capital? Explain why high-social-capital (high-trust) economies may be more successful than low-trust economies.
- Social capital- people’s capability and knowledge of how to work together successfully in building economic relationships
- Hypothesis 1: cultures that have relatively high
- amounts of social capital and trust will be more economically successful
- Hypothesis 2: US social capital has been falling
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Why a decrease in US Social capital?
- Mobility: people move because of work so that have less time to join social groups
- Entertainment: the more that people watch TV, the less they trust others. Deals with the nature of watching TV
- Education: people learn trust and build networks by joining community organizations
- Political Issues
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(Essay 3) Low-trust economies
- Most businesses are family owned
- Trust is natural within families
- Punishment for non-cooperative behavior is easier inside a family because of emotional ties
- Face potential limitations- lack of skills in the family, “I’m family, they can’t fire me”
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(Essay 3) High-trust economies
- More chance for economic success
- Bigger talent pool- even if started by family, it hires whoever is most talented
- Access to more financial resources- large and vibrant stock markets. Investors are less afraid that you will steal their money so they are more likely to buy stock
- Better government- good job providing public goods/services. Work harder to treat everyone equally. More resources for infrastructure
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