Simply put, social capital is the resource that can be derived from social relations. If physical capital refers to physical objects and human capital refers to properties of individuals, social capital refers to connections among individuals, that is social networks and the norms of reciprocity and trustworthiness that arise from them.

We're all familiar with the phrase "It's not what you know, it's who you know." In this model, what you know is human capital, and who you know is social capital. Both can obviously be exploited for personal benefit.

In 1973, a sociologist named Mark Granovetter wrote an influential paper called The Strength of Weak Ties. The idea is that in social networks links between individuals are called "ties". Strong ties are those that exist where relationships are extremely persistent and close, as in families and close friend groups for example. Weak ties exist where relationships are much more casual and intermittent. Many of the people one would send Christmas cards to, but not see in the course of the year, would be considered weak ties. So would the person you buy coffee from every day.

Social capital arises from both strong and weak ties. Strong ties tend to provide day to day support. Your mother watches your children for you, your close friend lends you an hundred dollars. Weak ties tend to provide more informational support. With strong ties, those that are closest to you in your network also know what you know. Weak ties are more likely to know surprising information since they are on the periphery of your network and have access to other types of information.

Often social capital is considered warm and fluffy, like concepts of community. It is true that civil society depends to some extent on positive caches of social capital, but social capital can also be used for nefarious purposes. An Ole Boy Network often excludes women and minorities to the detriment of society, yet still provides benefits to its members. Terrorist organizations often use social capital amongst families to deadly effect.

Robert Putnam makes a distinction between bridging social capital and bonding social capital. In his words "bonding social capital constitutes a kind of sociological superglue, whereas bridging social capital provides a sociological WD-40. Organizations may provide bonding capital to group members, while still acting as bridges to outside organizations. Think of a church that provides a common sense of identity to members, yet also plugs those members in to a wider array of social organizations, like volunteer groups.

Social capital is much more widely used than has been previously conceived. Recently, organizational researchers have been showing how major corporations like Toyota and Westinghouse use social networks to improve social capital benefits of suppliers.

Putnam argues that social capital, especially a type called generalized reciprocity is decreasing in the United States due to decreased participation in social groups of various stripes. He shows mostly correlational data, though very convincing, to prove that this decrease in social capital can be linked to a variety of social ills including increased crime rates, decreased political participation and lack of economic stability, among other things.

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