This isn’t the post I wanted to write.  I wanted to write about the ways in which value, distributed through digital platforms, creates new opportunities to develop human capital or social capital or something like that.  Yet, when I began reviewing the legacy of these terms I found that they carried so much historical baggage that any claims I might make would be hopelessly mired in semantic confusion.  Both terms omit critical aspects of the idea I wanted to convey and both have been used in inconsistent and imprecise ways.  In fact, I found this to be a common criticism in the academic literature on “social capital”:

Ordinarily, a theory’s parsimony i.e. its capacity to explain the most with the least is a desirable property; in this instance, however, a single term is being adopted indiscriminately, adapted uncritically, and applied imprecisely.
(Woolcock 1998: 196 – as quoted by Haynes 2009: 4)

For some this may seem a strange criticism.  In the popular milieu “social capital” seems to have a well understood, if not well defined, meaning.  Many people seem to accept a definition like:

For John Field (2003: 1-2) the central thesis of social capital theory is that ‘relationships matter’. The central idea is that ’social networks are a valuable asset’.
(infed.org)

In the age of Web 2.0, Social Networking, Crowdsourcing, Co-Creation, and all manner of other buzzword worthy innovations, we certainly accept that “social networks are a valuable asset”. The confusion begins when we ask the question: Valuable for whom?  Consider the following definition from the World Bank, which aptly summarizes many of the earlier academic definitions:

Social Capital refers to the norms and networks that enable collective action. It encompasses institutions, relationships, and customs that shape the quality and quantity of a society’s social interactions. Increasing evidence shows that social capital is critical for societies to prosper economically and for development to be sustainable.
(emphasis mine)

This definition and others like it, create inordinate confusion by attempting to analyze social capital at the level of the society or community rather than the individual.  In doing so they risk becoming circular.  An individual may be said to have a network, but the same cannot be said for a society or community.  A society or community emerges from a collection of individual networks; there is no group entity existing a priori that can be said to possess “institutions, relationships, and customs”. In other words, “norms and networks that enable collective action” are the characteristics that differentiate a community from a collection of individuals; they are not assets or capital to the community. This implies one additional criticism – that social capital is a tautology.  Social Capital is defined as a set of societal characteristics, and yet those same characteristics are said to result from social capital.

It should be clear that the concept I am searching for would refer to assets possessed by individuals that enable those individuals to achieve superior outcomes in a group context.  Perhaps what I intend to convey is “human capital”.  But, while “human capital” avoids the criticisms above, it fails to capture the group context that “social capital” conveys so intuitively.   Consider this definition from wikipedia:

Human capital refers to the stock of competences, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience.[1]

This definition refers only to the self-contained capabilities of the individual, ignoring the fact that the breadth and depth of an individual’s network clearly contributes to that person’s effectiveness.  Furthermore, this definition limits its scope to competencies that “produce economic value”.  Being a diligent community builder, a prolific mentor, or contributing generously to volunteer projects – apparently none of these activities cultivate human capital.

Lastly, human capital is generally measured through traditional modes of achievements - “education and experience”.  By this definition a college drop-out CEO possesses less human capital than an unemployable college graduate.  In an economy increasingly characterized by informal learning and value creation, this conventional notion of aptitude is glaringly anachronistic.

So I am still left searching for a concept that captures the convergence of these two ideas…a concept that acknowledges formal and informal learning, economic and social value creation, autonomous and networked capabilities.  Any ideas?

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Gregory Rader spends his 9-5 at an equity brokerage firm working with institutional asset managers.  His mind, however, is always wandering towards the horizon.  He expends much of his cognitive energy thinking about technological progress and how that progress might shape social and economic institutions in ways that enable people to explore their ambitions more freely and efficiently.  Greg has an undergraduate degree in economics from UCLA and is a candidate in the Chartered Financial Analyst (CFA) program.  You can read more from him at OnTheSpiral.com or start a conversation on Twitter @gregoryjrader.

Tagged in: economics, Human Capital, Prosperity, Social Capital