Social Capital and economic opportunities

Moving on from [Coleman, J.S., 1990. Foundations of Social Theory. Belknap Press of Harvard University Press, Cambridge, MA, London] and [Putnam, R.D., Leonardi, R., Nanetti, R.Y., 1993. Making Democracy Work Civic Traditions in Modern Italy. Princeton University Press, Princeton, NJ, Chichester], an ever-growing literature claims that repeating trustful interactions in the economy do sediment in higher levels of generalized trust. This aggregate stock of trust is then named Social Capital and treated as an input in the aggregate production function, such as labour, physical capital, or human capital. In this paper we argue that in many instances there is no need for meta-concepts like Social Capital, as trust is often simply the outcome of profit maximization. Whilst approaches that refer to Social Capital ignore the set of economic opportunities, incentives and conflicts behind trust, in this article we propose a simple model to show that when these are taken into account, the roles of trust and Social Capital can be better defined and understood. © 2005 Elsevier Inc. All rights reserved. JEL classification: Z130; A139