Sunday, February 12, 2006

Decontextualizing "Pera o Bayong"

How does Social Capital stack up against Private Capital?

Part of the answer may be found in Stefan de Vylder's The Rise And Fall Of The "Swedish Model" where he discusses the role of institutional or social capital in economic growth. He notes for example that social capital can be regarded in two ways. Thus:

"To be rich in social capital can be seen as an end in itself - such a society is, by all criteria, more pleasant to live in than a society where the social capital is weak, or eroding. Social capital can also be regarded as a means, as social capital makes the use of other forms of capital both more equitable and efficient. Transaction costs are drastically reduced when people trust each other, when contracts are enforced, when the legal system is honest and when economic policies are predictable."

Perhaps conversely transaction costs are high because the conventional emphasis on (scarce) private capital allows unenforceability of contracts, dishonest legal system and unpredictable economic policies.

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