Assessing networked risks through the measurement of Social Capital – first lessons from the World Social Capital Monitor

This post has been contributed by Alexander Dill of the Basel Institute of Commons and Economics

Can trust, solidarity, helpfulness and friendliness have an impact on economic outcomes by lowering the costs for externalities such as security, peace and environmental damage? If the answer is yes, these supposedly ‘soft’ social goods should be given more attention.

The intuitive importance of the concept of “social capital” has long been recognised, but efforts to define and measure it have been less successful. In 1999, then Chief Economist of the World Bank, Nobel Laureate Joseph Stiglitz launched the Social Capital Initiative (with contributions from two other Nobel laureates: Amartya Sen and Elinor Ostrom), which led to a detailed 27-page household questionnaire being administered in a number of countries, but the complexity of the concept continued to be an obstacle to the meaningful application of results to policy and programme interventions.

So which are the aspects of social capital that should be made a priority for measurement? Social capital can be seen as relationships and social networks within groups (‘bonding’ social capital) or as social relationships, values and perceptions across ethnical, political and religious groups, also known as ‘bridging’ social capital. Bridging social capital can be seen to underpin such concepts as trust, solidarity and friendliness, and it is these phenomena which could be the most valuable to underpin the functioning of democratic, stable and resilient societies. More trusting and cooperative societies are likely to have to spend less on transaction costs and externalities.
This is why the World Social Capital Monitor started measuring eight indicators of bridging Social Capital in 36 languages and 141 countries, that serve to assess networked risks and to lowering the costs of externalities. Now the social climate, the willingness to co-finance public goods by austerity measures and taxes, the willingness to invest in local cooperatives and SME, trust, helpfulness, friendliness and hospitality can be locally scored on a ladder between 10 (high/excellent) and 1 (low/poor). You can test it yourself by scoring your town on https://trustyourplace.com/ on any Smartphone, PC or tablet.

From former surveys e.g. on trust by the WHO in 2012 (deviation 2.41 on the same ladder) we could expect a high deviation. But the deviation given by the Trust Your Place survey was much lower. In Cambodia the citizens of 18 provinces only differed by 1.5 points on average when they scored their bridging Social Capital. The poorest province of Kandal had better scores than the capital Phnom Penh. To better understand the Global distribution of Social Capital we may have a look at a comparison of interpersonal trust in four countries.

Dill Blog Image

Source: Social Capital Assessment, Basel Institute of Commons and Economics, 2012/2016

In Japan, high societal trust allowed to recover after the double disasters of the earthquake and Fukushima in 2012. The Basel Institute therefore published the results to argue against a downgrade of Japan in rating. In Ukraine in 2012 however, interpersonal trust was entirely down – and ended in the decline of economy and society in 2014 and the loss of Crimea and Donbass. At the time most of the analysts published positive outlooks on Ukraine and saw the country to becoming a candidate for the EU.

In Afghanistan trust with a score of 4.95 is the worst of the eight indicators of Social Capital but at the same level as in many Western countries.
So the level of trust can indicate high political and economic risks (Ukraine) as well as societal stability (Japan, Cambodia) and a promising base for reconciliation in a country being in war for decades (Afghanistan).

Related links

Basel Institute of Commons and Economics

Wiki article on ‘Social Capital’