Oakes

Social Capital

78 posts in this topic

Personal benevolence towards your friend or your neighbor is not a commodity for trade on the open market.

I hope the above answers this. Mutual-credits do not create an "open market" in the sense you mean; they are restricted to small communities. When A does a favor for me, and I pay off my credits mowing B's lawn, we have just created two social links instead of one. I may not have known B, but through these exchanges I can get to know him and evaluate his character.

You've missed the point. We act with benevolence towards a particular person, for a particular reason; it is they and their problem that we respond to with help. Such an act has nothing to do with the person down the street; it is a singular act for a singular purpose. An economic structure is completely different from this. Economically we establish a means of exchange because of the practicality in mutual trade. But a personal act of friendship or benevolence is solely between the two parties involved, so you are attempting to establish an economic context where it does not apply.

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I hope the above answers this. Mutual-credits do not create an "open market" in the sense you mean; they are restricted to small communities. When A does a favor for me, and I pay off my credits mowing B's lawn, we have just created two social links instead of one. I may not have known B, but through these exchanges I can get to know him and evaluate his character.

You've missed the point. We act with benevolence towards a particular person, for a particular reason; it is they and their problem that we respond to with help. Such an act has nothing to do with the person down the street; it is a singular act for a singular purpose. An economic structure is completely different from this. Economically we establish a means of exchange because of the practicality in mutual trade. But a personal act of friendship or benevolence is solely between the two parties involved, so you are attempting to establish an economic context where it does not apply.

What Stephen said; thank you Stephen. :o

Not only does the "concept" of social capital attempt "to establish an economic context where it does not apply," it actually removes an aspect psychological value that an act of benevolence or generosity gives the bestower, and fundamentally changes the act. When I am able to help a friend, I receive personal satisfaction by that act. I am happy I am able to lend a hand! Even if it is a neighbor with whom I'm not especially close, I'm glad to be able to breed good relations, which are of value to me. I've had a bad neighbor before, so I understand the value. If I find that I have a Homer Simpson next door, who borrows and borrows, and never returns or reciprocates, I no longer lend a tool or my help. As long as Homer isn't a trouble-maker, the relationship is neutral, neither good nor bad.

The idea that these relationships ought to be codified in an institutionalized financial system, no matter how small, won't lead to the kind of social capital that is being theorized, but will serve to remove the voluntary act of benevolence and replace it with an institution's ledger sheet. Such acts are strictly in the purview of the actor, are personal in nature, and are subject to the actor's judgment alone; and the payment, be it psychological or in kind, belongs to the actor alone.

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It's clear that the act of generosity is between the two people in question; what I'm not understanding is why an economic structure can't be used to encourage more of the same. This is not promiscuous generosity, because it is limited to a small community where you can morally evaluate the people you're trading with.

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It's clear that the act of generosity is between the two people in question; what I'm not understanding is why an economic structure can't be used to encourage more of the same. This is not promiscuous generosity, because it is limited to a small community where you can morally evaluate the people you're trading with.

But we deal with them individually, not as a group. The nature of our response is directed towards a specific person in a specific situation, and cannot be transferred as we would with monetary funds. You are thinking in terms of a commodity, which simply does not apply.

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I keep hearing the viewpoint that it's turning relationships into a "ledger sheet" or a "commodity." I don't know about you, but if my friend credits my account after doing me a favor, my appreciation will not be "transferred" away. I will still most likely return the favor personally, but credits will also encourage me to do the same for someone else. I don't want to make any of you repeat yourself, but I remain interested in the system not only because I agree with the general theory, but because of the results I have read about.

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It's clear that the act of generosity is between the two people in question; what I'm not understanding is why an economic structure can't be used to encourage more of the same.

Because fiat currency isn't what caused the diminution of "social capital" in the first place. General benevolence and friendliness towards others isn't caused or facilitated by a specific kind of currency (mutual credit system or MCS)--as your source alleges. Its causes are very different and far more fundamental than that: personal values. Selfish people are friendly and benevolent, and it isn't because they keep a bank account of personal favors and debts to their friends and neighbors. :oThat is hardly a way to foster the creation of "social capital". Likewise, general malevolence and hostility towards others isn't caused or faciliated by fiat currency or lack of MCS. Its causes are very different and far more fundamental than that: altruism.

---------

Given the concretes you provided in post #1, I believe there is a far better term--one that is valid and widely used--for "social capital": it's called "social ACTIVITY".

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I keep hearing the viewpoint that it's turning relationships into a "ledger sheet" or a "commodity." I don't know about you, but if my friend credits my account after doing me a favor, my appreciation will not be "transferred" away. I will still most likely return the favor personally, but credits will also encourage me to do the same for someone else.

So then, you make double entries in your "appreciation" book. You return the favor directly to your friend (as most of us here have indicated we would), but then you also owe in the form of a credit a favor to another. Strange. Why not just stick with the original?

I don't want to make any of you repeat yourself, but I remain interested in the system not only because I agree with the general theory, but because of the results I have read about.

And where exactly were these "results" reported? (I don't mean to be flippant, but you were not around in the 1950s and 60s when the Communist "results" were being reported.)

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I keep hearing the viewpoint that it's turning relationships into a "ledger sheet" or a "commodity." I don't know about you, but if my friend credits my account after doing me a favor, my appreciation will not be "transferred" away. I will still most likely return the favor personally, but credits will also encourage me to do the same for someone else. I don't want to make any of you repeat yourself, but I remain interested in the system not only because I agree with the general theory, but because of the results I have read about.

What you are talking about is taking something personal to the individual and collectivising it.

So, how do you know that your friend is the one who has credited your account. Does the local institution send you a monthly statement of who did what?

What about those who end up with more debt than credit? Will the courts force that person to go out and pay back the acts of benevolence and generosity? How can such acts continue to be called generous or benevolent when they are done under a threat of the law?

Say you've banked a considerable amount of credit. You would be strictly limited to spending your capital within the community where you banked it, or else the whole system may as well be what it is already. What if you move? What happens to your account then? Would different communities then have to set up special institutions to trade off the credits of those who move from one place to the next? Who will pay the cost of keeping these records?

In short, how do you keep your little community money in the community in a dynamic society?

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It's clear that the act of generosity is between the two people in question; what I'm not understanding is why an economic structure can't be used to encourage more of the same.

An "economic structure" would unnecessarily complicate -- and inhibit -- the simple spiritual "trades" that now happen everyday between neighbors.

I don't help my neighbor because I owe him something, but because I want to do it. If he accepts my help, a "Thank you," or other sign of appreciation will suffice. He has no other obligation to me. If he wants to help me out in the future, that's nice but not necessary.

Generosity isn't a delayed transaction than sets up an obligation between the donor and the recipient. It is a complete spiritual -- not economic -- trade fulfilled in the act.

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Before I answer you individually, I want to ask: Are you all against the means or the ends? Are you against the entire idea of providing mechanisms to build social relations between people, or are you against the specific idea of using a monetary system to do that, because it would be creating social relations for the wrong reasons (for monetary reasons rather than a response to values)?

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Before I answer you individually, I want to ask: Are you all against the means or the ends? Are you against the entire idea of providing mechanisms to build social relations between people, or are you against the specific idea of using a monetary system to do that, because it would be creating social relations for the wrong reasons (for monetary reasons rather than a response to values)?

I am against your proposed monetary system, not because it "would ... creat[e] social relations for the wrong reasons", but because it would NOT create social relations at all. In fact, as Betsy stated, it would "unecessarily complicate--and inhibit--the simple spiritual 'trades' that now happen everyday between neighbors".

I still hold: fiat currency does not diminish social activities and social relations; likewise, a different currency does not foster their formation.

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I don't know about you, but if my friend credits my account after doing me a favor, my appreciation will not be "transferred" away. I will still most likely return the favor personally, but credits will also encourage me to do the same for someone else.

Why will credits "encourage [you] to do the same for someone else?" Why is your account with your friend known (or used) by anyone else besides you and your friend?

f it isn't, then why is an account necessary AT ALL? Why can't you just remember that your friend did you a favor?

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Before I answer you individually, I want to ask: Are you all against the means or the ends? Are you against the entire idea of providing mechanisms to build social relations between people, or are you against the specific idea of using a monetary system to do that, because it would be creating social relations for the wrong reasons (for monetary reasons rather than a response to values)?

I am against both. Social relations between people are created at the choice of the people involved. We already HAVE voluntary institutions to facilitate communities (this board!). To attempt to override the judgment of individuals in weird attempts to "make them more social" is not appealing to me. "Social Capital" is like what a planned economy is to a free market, IMO.

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Maybe I just don't understand this whole "social capital" thing. As I understand it, it is a system where people can build up and trade "nice guy" points by doing nice things. The problem is that "nice guy" activities are STRICTLY between the parites involved and CANNOT be transferred to outside people.

If my neighbor "a" does something nice for my other neighbr "b," he has credit with "b" and ONLY with "b." I certainly owe him nothing. Under your system it seems like "a" could come up to me and say "I have all these nice guy points. Now you have to be nice to me." Sorry, "a," but no I do not. If you do something nice for ME, then and only then do I owe you.

Now if I am wrong, and the credit between "a" and "b" can never be transferred to anyone else, then I am even more confused: what on earth would be the point of such a system?

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I feel kind of frustrated right now. I'm seeing a lot of misunderstandings, and they are compounding as each post goes by. I don't think I've explained the concept very well, and instead of dragging on this topic any longer, I think it's best that I let it go. As for mutual-credits, I'm not ready to erase it from the interests section of my profile, so for now I will consider it "unresolved" until I grow more experienced in the field I plan on studying. I want to be a banker :o

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I feel kind of frustrated right now. I'm seeing a lot of misunderstandings, and they are compounding as each post goes by. I don't think I've explained the concept very well, and instead of dragging on this topic any longer, I think it's best that I let it go. As for mutual-credits, I'm not ready to erase it from the interests section of my profile, so for now I will consider it "unresolved" until I grow more experienced in the field I plan on studying. I want to be a banker :D

If you figure out a better way to explain it, let me know. I'm still not sure what the point of the whole thing is... :o

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I feel kind of frustrated right now. I'm seeing a lot of misunderstandings, and they are compounding as each post goes by. I don't think I've explained the concept very well, and instead of dragging on this topic any longer, I think it's best that I let it go. As for mutual-credits, I'm not ready to erase it from the interests section of my profile, so for now I will consider it "unresolved" until I grow more experienced in the field I plan on studying. I want to be a banker :o

Since you want to be a banker, I recommend that you read particularly Ludwig von Mises's Theory of Money and Credit and Richard Salsman's Breaking the Banks. However, since those two books cover narrow and specific topics in economics (money and banking), it might be better to learn basic economics before reading them.

But the last thing you want to do when learning the fundamentals of a given field is to study the works of those who attempt to destroy and discredit it: like reading Marx and Keynes for economics, or studying Vodoo and mystic healings for medicine, or reading about primitive mythologies and religions for physics and chemistry. There's nothing wrong in reading about such topics; but it should not be in order to become proficient and sage with respect to the field, but to learn from such grave errors and disastrous fallacies. Likewise, if you're just learning basic economics, don't read about "social capital" and mutual-credit systems, for you could be easily misled.

For a brief introduction, I recommend Hazlitt's Economics in One Lesson. For an intesive introduction, I recommend Reisman's Capitalism, which is in a free, downloadable PDF file in his website www.capitalism.net. I also recommend the British classics and the Austrians for a more in-depth understanding (e.g., the books by Smith, Ricardo, James Mill, John Mill, Say, Mises, Hazlitt, Menger, Bohm-Bawerk, etc.) Such a broad and deep knowledge, I believe, will be very valuable to you as a banker. :D

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For a brief introduction, I recommend Hazlitt's Economics in One Lesson.  For an intesive introduction, I recommend Reisman's Capitalism, which is in a free, downloadable PDF file in his website www.capitalism.net.  I also recommend the British classics and the Austrians for a more in-depth understanding (e.g., the books by Smith, Ricardo, James Mill, John Mill, Say, Mises, Hazlitt, Menger, Bohm-Bawerk, etc.)  Such a broad and deep knowledge, I believe, will be very valuable to you as a banker.  :o

Thanks for the recommendations - I plan on reading both of the works you mention above. Right now I'm reading Sowell's Basic Economics, but I've heard negative reactions to it by some Objectivists. Is there a reason for that?

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Thanks for the recommendations - I plan on reading both of the works you mention above. Right now I'm reading Sowell's Basic Economics, but I've heard negative reactions to it by some Objectivists. Is there a reason for that?

I have only read a few excerpts from his Basic Economics and Applied Economics as well as several of his essays in capmag.com, but from those and what I've heard he seems to be basically pro-capitalist but with mixed elements.

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I feel kind of frustrated right now. I'm seeing a lot of misunderstandings, and they are compounding as each post goes by. I don't think I've explained the concept very well, and instead of dragging on this topic any longer, I think it's best that I let it go. As for mutual-credits, I'm not ready to erase it from the interests section of my profile, so for now I will consider it "unresolved" until I grow more experienced in the field I plan on studying. I want to be a banker :)

The principle here is very simple, and thus far that I've noticed everyone has talked around it instead of explicitly identifying it, Oakes worst of all (which would be why he is frustrated and confused.)

This is how a social-credit system would work in practice if such a thing were possible:

My neighbor Adam comes up to me and says "Can I borrow some nails?"

"Sure."

Let's now say that he "jots down" a debit to his account, and I take down a credit. He takes the nails and goes home.

Now, neighbor Adam is at home. Being a pro-active kind of guy and not liking to have a debit, he goes to the central bank (perhaps online) and discovers that Barnard next door has excess credit and wants his lawn mowed.

[Notice here that this means that Adam has to a.) have some means of knowing who has credits and b.) have some means of knowing which of those people with credits have favors that need doing, all of which has to be paid for . . . by what? The loans are "interest-free". Interest isn't just PROFIT for the bank, you know, it pays for bank OPERATIONS.]

So, Adam goes over and mows Barnard's lawn. He may have to drive all the way across town to do this; doesn't matter, Barnard has credits, and a lawn that needs to be mowed. Assuming Barnard is willing to have his lawn mowed by someone he doesn't know, the transaction goes through and Adam's credit is cleared. He's met Barnard. Barnard, having no clue who the heck this guy is, reacts with hostility and suspicion and is glad to see Adam go. "Why did I ever sign up for this program?! I'm getting rid of my credits RIGHT NOW!"

So, he goes online and discovers someone with debits, say Charlie. He goes down to Charlie's house, knocks on the door and says, "Can I borrow some . . . um . . . some stuff?"

Charlie is flabbergasted. "Who are you?"

"I live three blocks down the street. I want to get rid of some credits, so can I borrow some stuff?"

"What sort of stuff?"

"It doesn't matter, I just don't want any more strangers showing up asking to mow my lawn. I'm closing my account as soon as I can."

"I could give you . . ."--Charlie seizes upon the first thing in her line of sight--"these worn-out shoes I use for gardening."

Barnard takes the scungy old shoes. "Great!" He runs for it, horribly embarrassed by the entire encounter. Charlie goes back inside, removes her debit, and closes her account.

As for me, friendly person that I am, six months later FTD florists shows up at my door with some badly-wilted flowers and a card that says "We're so sorry about your mother" . . . signed by someone I don't know. There's nothing wrong with my mother. Someone got their transfer messed up. By this point, I'm sick of the whole thing, so I go, cancel my credits, and close my account.

This is supposed to represent a BENEFICIAL system? According to WHOM?

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Based on my understanding of economics, (I've only taken Intro to macro and micro) I think this term social capital either has no place in the field or is of minimal relevance. In economics, capital is used to describe a resource that can be directly used to increase production of goods and/or services at the level of firm, industry, or entire economy. This is broken down physical capital and human capital. Physical capital is anything like factories, machinery, or computers that increase production capabilities. Human capital is the amount of training/education/knowledge that exists among the population or certain groups of the population.

My doubts about the relevance of this term, social capital, stem from the fact that I do not think an increase in "social capital" will create increases in production at any of the three levels. One way for social networks to be of value to an economy they would have to aid in the placement of workers into jobs where they will be the most productive or aid in a firm finding the best worker for the job. While I can see how this could be the effect of a given social connection created by a social network, I think it is insignificant compared to how many such events result from people sending out resumes or posting them on them on sites like monster.com. Also I can imagine that some social connections that would arise from a social network might place a worker in a position where he will be ineffective compared to an alternative worker or job.

Then there is this quote about social capital that I found on wikipedia.com: "Social capital "refers to the collective value of all 'social networks' and the inclinations that arise from these networks to do things for each other," according to Robert Putnam, author of Bowling Alone"

This definition of social capital makes its benefits sound like simply the value of favors, either exchanged or granted in a collectivist spirit. In economics, generally services or activities(like favors) that are not sold and bought are not counted as production. I can imagine some circumstances in which having many people upon which you could ask favors from might aid in production. It would be a situation in which you have multiple things that need to be done but you have a pressing issue involving production. If you had a ton of social connections you could find someone to who had free time to help you out. Such situations are rare enough that this benefit is insignificant.

To summarize: Physical capital goes up = production goes up. Human capital goes up = production goes up. Social capital goes up = production could go up or down but I doubt it would be significant.

Instead to of focusing on production you could try talk in terms of total utility or value (which is a pretty murky area to me). I don't think that increases in favors given, resultant of increased social connections, will necessarily lead to an increase in total utility. There are many situations where people could have mutually beneficial exchanges of favors. On the flip side, I think that for these exchanges to have to increase total utility, they would have to more than offset the utility lost from less time spent on production and leisure.

I think the term could be useful in the fields of anthropology, sociology, or political science but not economics.

Additionally, anyone who uses the phrase “value of all 'social networks' and the inclinations that arise from these networks to do things for each other," probably has collectivist motives.

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...

I think the term could be useful in the fields of anthropology, sociology, or political science but not economics.

Additionally, anyone who uses the phrase “value of all 'social networks' and the inclinations that arise from these networks to do things for each other," probably has collectivist motives.

I question the validity of the term altogether, so I wouldn't try to use it in my reasoning. The term "human capital" is also questionable. Capital as goods used for business purposes is a valid concept. Human capital, however, seems to be a serious misintegration of human knowledge, skills and experience with goods used for business purposes. They differ radically from the capital used by business firms, unless of course, there is slavery, in which case one could apply the term "human capital" to them.

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To clarify, human capital is not a term used when talking about the levels of the firm or the industry. When an individual goes to college or takes a training course they are investing in their own human capital (the skills and knowledge that help them to produce). It is used talking in terms of the entire economy also it is used in discussions of disparities of earning between groups (like whites and blacks or men and women). The level human capital in the economy is higher now than it was 20 years ago because a much higher percentage of people graduate from college. Also this has factor contributed to the higher levels of productivity.

One issue that I've thought about in terms of human capital is the privatization of schools. If schools were privatized children would receive much better educations and also more of them would go on to invest in their human capital after high school. It's hard to imagine how much higher our standard of living would be if schools had been privatized just 50 years ago.

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To clarify, human capital is not a term used when talking about the levels of the firm or the industry. When an individual goes to college or takes a training course they are investing in their own human capital (the skills and knowledge that help them to produce). It is used talking in terms of the entire economy also it is used in discussions of disparities of earning between groups (like whites and blacks or men and women). The level human capital in the economy is higher now than it was 20 years ago because a much higher percentage of people graduate from college. Also this has factor contributed to the higher levels of productivity.

...

Still, it should not be called human capital. Capital is wealth--alienable material goods used by business firms for making money. I see no valid reason why it should be extended to include human knowledge, skills and experience. If indeed paying for education and such is a form of "investment", then one would have to think of wages as sales revenue and deduct educational costs and such from it. Workers and wages earners would then earn 'profits' on their wages and salaries.

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Still, it should not be called human capital.  Capital is wealth--alienable material goods used by business firms for making money.

In addition, capital is used up to generate income. That is not true of an education. You can depreciate a machine, but not a PhD.

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