The Economics of Social Capital

We've been talking about "social capital" in class. It's the idea that the benefits and drawbacks from personal relationships over social networks (in real-life or in virtual situations) make deposits and withdrawls in our overall accounts of human interaction. Apparently, the more positive relationships you have with family, friends, coworkers, friends of friends, acquaintances, etc., the more social capital you've achieved. If you abuse those connections and the relationships turn sour, your social capital fund can suffer a slide. Social capital can then be used within your social network for the powers of good (get a job, get a discount, get advice, etc.).

It's a great system, quite similar to the "emotional bank account" described in 7 Habits of Highly Effective people. What makes this more interesting, if you make the direct comparison to money, a lot of other metaphors come into play. You can invest capital, expecting a return. You can have debts, you can forclose or go bankrupt, you can be rich or poor.

One concept we discussed in our group was inflation. My original thought was that "dollars" of social capital must be worth less than they used to be, because many years ago, it was much harder to keep in touch, and therefore the circle of friends and acquaintances would have been smaller. Then the telephone showed up, and the circle grew. Then email showed up, and suddenly long distance charges were overcome. Then chat became popular and you could have 50 people from all over the world on your desktop available to message at any point. Then social media started telling us that we now can contact hundreds of "friends" at the touch of a button.

So if someone with 20 friends used to be rich in social capital, am I absolutely dirty rotten filthy stinkin' rich because I have 375 friends on Facebook? Or has the value of social capital just depreciated?

Wayne was wise enough to point out that some great things come from continued contacts with these obscure acquaintances, so the value can't be that low. Experiences that would not otherwise be possible, can now be arranged because somebody had email, a cellphone, Facebook, etc. I completely agreed with him, but was certain that our relationships aren't as... potent... as they once were.

Perhaps what we lack in potency, we now make up in volume. While that seems like a prime definition for inflation, I finally figured out that the difference is this. Human relationships are unique. What you feel about your mother is nowhere near what you feel for a classmate, for example (unless you've got some mommy issues that need some attention). On the other hand, what you feel for one dollar is exactly what you feel for the next dollar and the next. No single Loonie gets priority treatment. It doesn't matter if it's been in your pocket for a year, or five minutes, a dollar is a dollar.

Social capital is NOT subject to inflation because in this system, a person is a person. Your mom, your classmate, your spouse, your boss, that friend of a friend, that girl from the bar who took your phone and put her number in under "Ashley maddy," and that guy you met at the conference last year all have the same value: one personal relationship. They're all just loonies in your pocket... and now, because of continuously improving technology, we're all much richer.