Social capital in economics

The concept of social capital has received significant attention from economists, as it allows for the inclusion of social factors that lie beyond the traditional scope of economic analysis. Despite its intangible nature, social capital has long intrigued some economists, who recognise the role of trust, reputation, norms, and belonging in shaping economic outcomes. However, social capital's multidimensional, intangible, and dynamic nature presents challenges in its conceptualisation and measurement. This article explores the complexities of social capital and its constituent parts, highlighting the need for a nuanced understanding. While social capital is often simplified to tangible components such as social networks or individual trust, this reductionist approach fails to capture its full complexity. James Coleman's rational action-based definition of social capital has been widely embraced by economists, aligning social capital with social exchange theory. Nevertheless, various definitions of social capital have emerged, incorporating structural and cognitive elements. However, the concept of social capital has not been without its critics. Esteemed economists, including Arrow, Solow, and Bowles, have voiced concerns, and Ben Fine has called for its outright rejection, labelling the social capital literature as flawed. The article argues that the economic analysis of social capital must carefully consider its theoretical underpinnings and grapple with its inherent complexity. Researchers must critically examine assumptions, question the meaning of their findings, and acknowledge underlying assumptions when applying social capital theory. Achieving a comprehensive understanding of social capital requires rigorous analysis that accounts for this important social phenomenon's diverse dimensions and intangible aspects