The Challenge of Building Social Capital for a Sustainable and

Desirable Future

Elinor Ostrom

Indiana University

Immense and Growing Interestin Social Capital

Let’s look at the citations in the Web of Science on Social Capital

Year Number of Citations

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2

6

15

14

28

38

61

112

129

176

210

257

296

324

358

*Includes Science Citation, Social Science Citation, and Humanities Indexes. For an earlier version, see Ostrom and Ahn (2003: xii). Thanks to Andy Revelle for doing this search.

Web of Science

Why? Link of Social Capital to Collective Action and Development

Collective action needed whenever More than one actor needed to generate outcomes Exclusion of beneficiaries costly

Public goods – peace, knowledge, prosperity Avoiding public bads – war, destruction of natural

resources – e.g., forests Teams of all kinds (may produce goods OR bads)

Scale varies from a single family, a gang, a small community to the global “community”

All development efforts involved some form of collective action

Collective Action Difficultto Achieve

May require input from many – costly Since some benefits may be achieved even if

one is a hold out The temptation to be a free rider is always present

Not participating or shirking threaten success

Too many hold outs, however, and benefits not achieved

Trust that others will reciprocate contributions is essential

What are Key Questions re SC

What is social capital? How is it similar or different re other forms of

human-made capital—i.e., physical and human capital?

How do we build this form of capital? How do we measure the outcomes of social

capital? These are the questions that all of us here are

addressing in one way or another

Human-Made Capital

All forms created by spending time and effort now to increase productivity laterTransformation activitiesTransaction activities

All forms of capital can also be created as a by-product of other activitiesEngage in a team sport – learn a lot about

others on the teamEngage in making one type of physical

capital – learn transferable skills

Physical and Human Capital

Physical: Stock of material resources Human: Stock of acquired individual

knowledge and skillsBoth built by transformation and

transaction activitiesProduce a flow of future returns (which

benefit some and may harm others)Create new opportunitiesConstrain events

Social Capital

Stock of shared understandings, norms, rules, and expectations that groups bring to a recurrent activity (Coleman, 1988)

Built by transformation and transaction activities

Produces a flow of future returns (which benefit some and may harm others)

Creates new opportunities Constrains events

Forms of Social Capital

Networks of relationships both within and across organizations (teams, gangs, cartels)

Institutions – rules-in-useTrustworthiness relationships built over

time

Institutions are:

Rules-in-use that structure organizations and activities

Crucial to building trust Forms of social capital themselves

Represent investment of time and effort to increase productivity and reduce social costs

Can generate positive or negative consequences Take a long time to build up Can be destroyed rapidly

Forms of Social Capital, Trust, and their Linkage to Achieving Collective Action

Contextual VariablesTrustworthiness

Collective ActionTrustNetworks

Institutions

Source: Ostrom and Ahn (2003: xvii).

Forms of Social Capital and Collective Action: A Simple Causal Model

Affect Trustor’s belief about Trustee’s behavior Affect Trustee’s behavior

Forms of Social Capital

Trustworthiness

Network Structure

Institutions

Collective-Action Situation

Trustor entrusts

Trustee reciprocates

Better Outcomes for Participants with Positive, Neutral, or Negative Externalities

The Need to Build Social Capital

Not the foundation of contemporary development practice

Much development practice based on panaceas Focused largely on building infrastructure Building irrigation systems without recognizing

the importance of building social capital Lets look at the performance of locally

constructed physical AND social capital --compared to externally constructed physical capital

Nepali Landscapes Look So Peaceful

Behind the Beauty are CPR Dilemmas: Who Gets the Water?

Farmers Construct and Maintain Canals and Roads in Tough Terrain: Tough Work!

Nepal Irrigation Institutions and Systems Database

After years of fieldwork with colleagues in Nepal, we now have data on outcomes: Overall physical condition of canals,

diversions works, and weirsTechnical efficiency – getting water to tail end

of systemEconomic efficiency – relationship of benefits

to costs of maintenanceFor 230 systems

Table 1. Relationships between Governance Structure and Physical Condition of Irrigation Systems

Types of Governance

Structure

Physical Condition of Irrigation Systems

FMIS (%) AMIS (%)

Chi-

Square Value

Sig.

Excellent [37]

18.2

8.4

Moderately good [144]

67.4

45.8

Overall condition

Poor [48]

14.4

45.8

23.02

.00

Highly efficient [58]

28.9

12.5

Moderately efficient [137]

62.8

50.0

Technical efficiency

Inefficient [33]

8.3

37.5

27.30

.00

Highly efficient [66]

33.2

12.5

Moderately efficient [140]

63.5

52.1

Economic efficiency

Inefficient [23]

3.3

35.4

45.35

.00

Note: Number of irrigation systems is in brackets. Source: Joshi et al. (2000: 78).

FMIS – High Levels of SC/Low Levels of PC and HC

Large variety of rules-in-use on FMISUniform formal rules on AMIS

Frequently not enforced or even known by farmers

FMIS rules are tailored to local cultural and biophysical setting

Farmers themselves heavily involved in planning, construction, maintenance, and monitoring

Can Social Capital be Destroyed by Public Policies?

Yes – Through counterproductive international aid (Samaritan’s Dilemma)

Similar to many government agenciesShow a need for major expendituresSpend the funds allocated quicklyContract to get the work done by national

firmsRotate frequently to different projects &

countries

Other Ways of Destroying Social Capital

Through massive consolidation of local governments in US and Western Europe Increasing the size of schools Putting dissimilar ecologies in same local

government – Self organized institutions using different rules in

slightly different ecological systems (e.g. Maine lobster fisheries_

Yes – through declaring forests and other common property to be owned primarily by national government – India, Nepal, Africa

How Can Social Capital be Enhanced by Governments?

Creation and support of multiple forms of conflict adjudication through fair, rapid, and low-cost mechanisms – including arbitration

Support University—Community—Business networks, incubators, student internships, service learning

Encourage joint scientific activities Support accurate knowledge acquisition about local risks,

environmental quality, while allowing considerable variety of local solutions

And, What Can We Do?

Develop a better theory of collective action More complex theory of human behavior

Multiple types of players Importance of information and information-processing

capabilities Role of institutions in enhancing (or detracting from)

intrinsic motivations and trust Empirical research testing theory

In the experimental lab In large-scale field research In small-scale qualitative research

Triangulate our results

Studying and Building Social Capital is

ChallengingFunEconomically worthwhile

So, there is much for all of us to do!