SOCIAL CAPITAL: SYMPATHY, SOCIO-EMOTIONAL GOODS, AND INSTITUTIONS

This paper summarizes the current state of the social capital paradigm from the viewpoint of the authors. The paper presents and defends a social capital definition based on sympathetic relationships. The paper also summarizes an expanded set of rational preferences that depend on social capital. Then, the paper describes the origin of social capital and its economic consequences, and introduces the concept of socio-emotional goods. Socio-emotional goods may attach themselves to physical goods and services. When this happens, physical goods and services are exchanged on terms different than those values established in an arm's-length market or in exchanges between strangers. It is possible to invest in social capital and this paper reviews several opportunities for social capital investment. Moving from a micro to a macro focus in the study of social capital directs the paper's focus from informal to formal institutions. Finally, the paper summarizes agreed-on social capital principles that suggest that the social capital paradigm is maturing. Key Words: earned kernels, inherited kernels, institutions and networks, social capital, socio-emotional goods