Social capital as an economic institution
Social capital as an economic institution
Social capital represents a combination of “interpersonal networks” which are used to allocate scarce resources. Political scientists emphasise its role in complementing the market and the state, but sometimes in poor countries social capital acts as a substitute for the state and the market. When the markets have major defects and the state is weak and predatory, social capital may be a positive force, but it may also suffocate the growth of markets and the ability to govern well.
in particular pattern duster professor of economics at the University of Cambridge also at the London School of Economics at the University of Stanford California where he was also professor of physics and he was also at the board of the International Institute of economics token butter does good sinteres the parakeet amid over there two countries has investigated several topics and he deals with different topics and different areas he has investigated capital populations wealth development economics of games and so on and so forth the list would be too long the list of all the awards and acknowledgement obtained by the sculptor is very long so I won't list all the acknowledgments and that he received this afternoon we will have a presentation on earth capital as an economic asset well the word capital is something which is taught very early when you go to university and capital is very much discussed element it has both physical financial human intangible knowledge and for those who are not experts in economics the capital can be seen as a counterpart over cultural capital and then that social capital so the concept of social capital is perhaps the most difficult to capture and to measure and this afternoon practice Gupta will deal exactly with this problems if you look in Wikipedia you will see that the first statement the first concept is that for economics or sociology for philosophy for a behavioral studies and for other disciplines the word capital is fundamental part of the scoop term has contributed to the concept of social capital from the viewpoint of its economic value and the contribution that it can give to explain the conditions of populations and explain the level of development of populations and how capital can favour growth or discourage growth I like to thank the festival for giving me the honor to introduce this event and I would like to thank professor does Gupta for what he will tell you on this matter social capital as an economic asset thank you very much it's a great honor to be here particularly to be able to speak on the idea of social capital in Italy it's a very appropriate country I wouldn't have liked to speak on social capital let us say in Los Angeles or New York but Trento seems absolutely appropriate all social scientists and I obviously economists included wish to see something see the world in a through one lens not many many lenses physicists do that biologists wish to do that any social scientist worth his or her name wants to do it too because if there isn't a single lens through which you see the social world then you basically believe that it cannot be understood because our activities are related to one another when we go to the bank that's one activity when we get married that's another activity when we buy goods and services and other activity but we feel that a reasonably integrated person thinks through these options and sees how best to maneuver himself or herself through society and being a social scientist I have certainly never ceased to think that there might be a way of looking at the social world through a unified glass or lens and when I see the social world I don't mean only the world of the west or the north as we call it these days but also the world of the south the poor countries in Africa South Asia which is where I come from there should not be a different economics there from the economics here although of course institutions are very different and people behave very often very differently question why we have all come from the same pot in some sense if you trace us back sufficient thousands of years ago we came from the same pot and we have diverged and the bet the divergence needs to be seen in some way from the commonality of the human experience it is customary in modern days to think about the distinction s of individuals the people differ from one another because each of us has his own quote identity unquote and as of course true but in my scent my way of looking at things that's the uninteresting part of us what's really interesting is how similar we are and what follows from that similarity now I ask this question or these questions or these make these observations because a year ago I started writing a book which to me was the hardest book to write it was a very short introduction to economics for general public all of us anybody who wishes to understand what economics is about and it was a hard task in the sense that I didn't really know how to enter a book like that in the sense of not really understanding what the fundamental question of economics may be so what I want to do in the next 40 minutes is to try and give you what I think economics is about and why social capital is in some sense at the heart of it and you might say well that's odd because economics is now over 200 years old and nobody ever spoke about social capital until very recently so what's going on economists at the moment to meet an economist to immediately see markets written on his for it if you meet a political scientist you see government or the state written on his for it so where does this object come from and I want to take you through a kind of reasoning to explain why the foundations of my subject is something like social capital now never mind that it is called social capital economies don't like the word that's fine ignore the word I will or the term by the term I will mean my social capital let me begin by giving you a clean definition but definitions are only useful if they do something for you so I'll first give you the definition and then I'll forget the definition because that's not what's important what's important it what are the questions we ought to be asking and how should be best understand the social world around us my social capital I shall mean interpersonal networks that's it people know one another I meet a person shake hands we have a connection what we do with that connection is a different matter where there after shaking hands we go and have a drink whether we do business whether we take out our knives and try and kill each other those are that follows later but the point is making a connection and having a link is the basis of social capital that's what I'm going to call it of course it can be more than two people it could be 1015 it could even be that you don't know it may be a you know somebody else and something you know somebody and somebody knows somebody else you don't know that somebody else never the debt there is a link through that somebody okay so a knows be be know see a may not know see but a know see indirectly through be and I don't need to belabor the the the consequences are those kinds of links now the book I wrote and this is not an advertisement you don't have to buy it is a very small book called economics a very short introduction and it has it's just come out from Oxford University Press and I will take you this is how I began the book and today's lecture is about the first chapter of what economics is about I think the fundamental problem of economics or pretty much any social into relationship is the problem of trust and so imagine the following situation a group of people that for some reason or the other met and have realized that they have discovered a mutually advantageous course of actions what do I mean by that I mean that there are some things they can do together if they agree on it which will in principle make them all better off financially may be psychologically maybe he doesn't matter whatever they regard as the basis of feeling better okay now I'm going to give you a whole bunch of examples of what I mean when I mean when I talk about a group of people discovering a mutually advantageous course of actions the reason I'm going to give you a lot of examples I got three already on display is because it will it will sort of make you attentive to the fact that really I'm talking about life I'm not talking about some special aspect of life pretty much anything when people get together and said maybe let's go out and have a drink in a bar that may be one of the the course of action I have in mind but let me give you some more important or momentous examples well for example it could be that the citizens of a nation have seen the benefits of adopting a constitution for their country because they feel it's a good idea things will happen if they have one England for example just at the moment if every now and then talks about adopting a formal Constitution it could be that that's very momentous second example sharing the costs and benefits of maintaining a communal resource common property resource could be an irrigation system it could be grazing field it could be a coastal fishery these examples are very prominent in poor countries by the way and of course at lunch I was alerted to the fact that it's very prominent in in Italy and in the alpine regions as well three could be constructing a jointly usable asset villages in a in sub-saharan Africa might decide that they would like to create a drainage channel in a watershed which will collect water one person can't do it lots of people together can do it but then they have to share the water as well so there is a decision of how to distribute the benefits as well as how to distribute the burdens but taking it all together it's a good idea they say fourth example collaborating in political activity Robert putnams famous book on Italy started with that idea civic engagement lobbying Oh lobbying I say because if you don't like social capital you say AHA people our civic engagement all it means is a bunch of people are getting together and creaming more surplice out of society for themselves that's called lobbying still there are the group of people who want to do something and that might be lobbying getting together and saying well let us complain because the civil service is not very good here that could be that's an activity five do business when the purchase and delivery of goods can't be synchronized I need to borrow I need credit I go to somebody and he offers me credit but of course that's the the mutually advantageous course of action is that he offers me the credit I take if I pay him back okay he gains I gained insurance taking out insurance similar wage labor another example I work now and I get paid later but we both gain presumably otherwise we wouldn't be engaged in it six enter marriage that's a mutually at least ex-ante it looks a mutually advantageous course of action I should say as somebody who's been married for 39 years even exposed it's good news initiating a reciprocal arrangement I help you now now that you're in need with the understanding that you will help me when I am in need that's a kind of insurance by the way it's a kind of a contract not written down necessarily but a mutual understanding it happens nonstop all the time in rural communities are poor countries where established institutions aren't there and I'll come back to that by the way I'm trying to give you a lead as to where I'm heading eight creating a partnership to produce goods for the market could be a cooperative nine entering into an instantaneous transaction going to the supermarket purchasing some something across the counter that's a mutually advantageous relationship by the way you may not know that salesperson but you're getting a commodity at a price low enough for you to feel you're benefited presumably the seller is gaining as well ten to come back to something much more abstract being civil to one another a general agreement that we will not deface public property we will not when reasons meet each other just being courteous it's it's not exactly a bountiful commodity these days by the way in England people are very worried that Civic attitudes have deteriorated to the point that people are rude to one another in public so this is not exactly a non sequitur okay so here that's a whole bunch of examples and of course one can give more so now these people who have met found a mutually beneficial course of actions let us imagine that they have agreed on how to share the benefits and burdens of that course of action benefits and burdens are very technical terms in some sense and I'm not sure they have immediate interpretation in Italian but alike costs and benefits but it that way okay so if you want to get together and build a common property drainage system there are some costs involved labour if nothing else and the benefits are sharing the water so there is a now integral assuming that there has been agreement reached now I should tell you that that assumption of course is a very major one it may be that they won't reach an agreement and then they fight wars Civil War's and so forth so I'm ignoring a very important problem in economics which is how do people reach agreement the reason I'm ignoring it is because we just don't have enough of an understanding I should come clean no economist in his right mind should claim that he understands how agreements are actually reached so I'm going to suppose that the agreement has been reached there is now a further problem and here's the question here's the problem under what circumstances would the people or parties who have reached agreement trust one another to keep their word that in my judgment is the fundamental problem of economics and the social sciences in general and unraveling it will enable you to understand the multitude of institutions that have been created throughout the world dependent on the circumstances because the question of trust here is extremely fundamental most of the examples I have given you are non synchronized I offer my service now I get the benefit later how do I know that the person with whom I reached agreement will award me the benefit later arrives if I doubt it then I will not offer my service in which case the whole agreement unravels and nothing happens that's why the issue of trust is of central importance it's important even when you go into the counter to buy something in the supermarket you might say well there is no similar synchronization there is synchronization I hand over money I get the commodity so what's the problem well there are two problems one it may be packaged and I won't know what's inside it until I get home but usually I trust it to be all right now question why and so we are back to the question and there is another problem which is how does the person who has received the money know that it's not counterfeit the cash that I've given him presumably he trusts me or trust something perhaps the institution that will punish me in case it is counterfeit so there are different layers of trust involved but no matter what transaction it is there's some form of trust involved in it okay so that's the question what are the circumstances under which parties would have reached agreement trust one another to keep their word I can think of four broad examples and I'm going to go through them very quickly I'm going to go through the first two very quickly and then I'm going to go to three and four and spend the rest of my discussion on it the first example is when first context would be one where the people involved are fond of each other and I suppose the household is the best example the family is probably the best example of a context in which the issue of trust is resolved through the fact that people involved know that they're fond of one another remember it's not enough for you to be fond of the other party you need to know that the other party is also fond of you so the way the work the thing works here is that you in some sense the persons internalize the feelings of the other party because they care about one another so if I the reason I trust my wife or my wife trusts me in the many engagements that we are involved in every day we don't write contracts we don't call a lawyer to say here's the contract I will go shopping you will do the cooking or I'll bring up the children take up the children at the end of the day these are pass it and yet it works so the question is why presumably I expect her promises to be fulfilled and vice-versa one reason could be and that's the one I'm appealing to here there many other reasons maybe but this one is neutral affection I will feel bad if I let you down and let my wife down because I'm fond of her because I know that she would feel that down so in some sense if the cost will be borne by me in negating myself or not doing what I said I would do I have the incentives now I want I'm using economics words I have the incentives to do what I said I would do because if I don't do it I will feel bad why because I will have let my wife down and I'm very fond of her that's the kind of argument now I want to go beyond that because I can't get very far with affection as a context because households have to trade with one another and there need not be any affection there okay so the second one which enables us to broaden the context in which trust may be created is where the idea is that people are pro socially disposed sometimes we say here people are moral in the economics literature in recent years particularly in what is called the behavioural the new behavioral economics a great deal of attention has been paid to this and economists have been criticized for having a rather narrow view of human nature so the idea here is that we are not all selfish we care about the fact that if we say we've given our word then our word is our bond and the idea here is not mutual but it's looking at yourself in the mirror what kind of a person am I who says he will do something and then doesn't do it that's the idea of pro-social disposition something like an idea that you have some personal integrity that you are socially disposed you if you have shaken hands with a person to say you will do something then if you don't do it it's not that you care about that other person but you care about your own view of yourself that's the idea that's one way of looking at okay so if people are does be formed if people are like that are pro-social be disposed the argument goes why then they will trust one another the problem is though that we are more or less pro socially disposed most cynical people will say everybody has a price at some price some benefit he will not do what he said he will do the problem is nobody knows what other people's prices are so you can't have a society built on the idea that everybody is a person of integrity that's the problem different people like mark McGann D probably had an infinite price he said something he will do it no matter what Mother Teresa yes maybe perhaps we all would be a positive price and hopefully a very high price before we do not do what we said we would do but other people don't know what they are and if they don't you worry transactions won't take place so a society cannot rely on - so what is left well there are two alternative ways and I want to spend the next 20 minutes discussing them because they lead us to the heart of economics institutions and at the end it will be social capital all over again external enforcement of the of the agreement so one idea would be that this group of people who have agreed to share their benefits and burdens in a particular way go to an external authority could be a village chieftain could be a priest somebody in charge if you like who has got the authority in the modern States of course it will be the state at whatever left perhaps could be provincial level could be a city level could be a national level but that would depend on the day contract if you like and the subtext is that it's the enforcement is by the rule of law extreme example would be that the parties have actually gone to a lawyer and drawn out the contract and the contract says a will do that a will do this B will do that C will do that and so forth and so on and that's written down in the form of a legal contract and it's binding once the people have signed it you know the parties know in advance what the penalties are for failure to comply with the agreement it could be a fine in some cases it could be jail and so forth and so on something which will be a dramatic cost a high cost and of course that will act as the deterrent and that will the deterrence will keep people for in keeping to the agreement and that this third one the external enforcement is the basis on which much of economic reasoning goes we talk about the market as an institution and we ask well how does the market function all sorts of transactions are taking place in the market whether it's competitive or not not the issue how do these transactions take why do people trust one another to carry out these transactions because all the problems that I mentioned already are embedded in any market transaction so what's going on and the answer is well presumably there is a contract I I promised to pay you for delivery of these Goods now in six months time when I'm buying the in the market for and payment is made later and a contract is signed and the cost of my transgressing the contract presumably will be lower than the cost sorry sorry the cost of transgressing the contract will be presumably lot higher than the cost of carrying out the contract and that is why I carry it out so and of course the legal profession uses the external enforcement as the basis on which to think about contractual relationships there's nothing that I'm saying here is new but there's a problem with the answer and then you probably have already figured it out the problem is why should the parties trust the external enforcer to do the enforcing after all the external enforcer the dot we say it's the government but the government is not some abstract them entity it's composed of a lot of civil servants and politicians the people who are in the government sector well they're human beings and it costs them presumably something to enforce contract so why should you believe that they will do what you expect them to do which is to enforce the contract that you have actually signed so in some sense ask saying that there is a external enforcer is not really answering the question is really delaying the question delaying answering the question because you just basically shut the answer to a higher level by saying well there is that authority so the question really is the problem is that if the people who have signed the contract I'm using the word contract now because I'm thinking in terms of the rule of law as a way of thinking about external enforcement but it doesn't have to be the rule of law or contract in a village community it could be the chieftain he's the rule of law and he may he may have heard that you have agreed on this or you go to the chieftain and say well look we agreed to do this and I gave him this and he's not giving it back to me or something and then the chieftain asks questions around to see whether I'm telling the truth whether the other party is telling the truth and then makes a decision and says no I my ruling is this should happen or you get punished or you get shunned or so forth but the question nevertheless arises why should they trust the chieftain to carry out his job honestly this is not obviously a theoretical question we have examples of so many failed States in the world today that this is absolutely a vital living question and why maybe countries don't societies don't prosper when the state cannot be trusted to enforce agreements Africa is full of them and for two larger or smaller extent there is malfeasance in every society and it's useful to think of extreme cases just to understand how delicately balanced this whole network of trust is needed in any society we forget that the whole thing is hanging on a lot of abstract expectations that each of us has over others otherwise the whole thing unravels so it's well worth thinking about societies which are doing extremely badly to understand perhaps not why some societies like yours are working well but at least it's solitary that but for the grace of God maybe even you will go down if you see what I mean at least I try and persuade myself that I'm very lucky to live in a society where these expectations are hanging in some sense in a way which is mutually helpful so the third example the external enforcement we have noticed doesn't really answer so what does answer well I'm going to end by telling you that in some since I don't know the answer and when none of us economists knows the answer but we are getting nearer in some sense and I should tell you another thing which is if you understand why you don't understand something you really understood something important and I will end the lecture by explaining the sense in which we do not understand something but now I can say what it is we don't understand five years ten years ago I couldn't have so I suppose we have done something fourth example and that's the one which I want to harp on because the idea of social capital in my judgment sits at the bottom of it is mutual agreement mutual enforcement of agreement now the idea here is that the agreement is people are confident that the agreement will be carried out because there have an understanding that if any one of the parties violates the terms of the agreement then the other remaining members of party will punish them in some way okay we use the word social norms for it so instead of the rule of law we think of social norms now in social norms the idea is when we talk about a social norm it could be normal thing very usual humdrum norms and it could be momentous norms by social norm we mean an agreed-upon strategy strategy is the technical term we economists use but it's not very difficult to understand what it is a strategy is a conditional set of actions I will do this if that happens I will do that if you do this that kind of sentence constitutes a strategy I will be nice to you if you're nice to me I will lend you this if you do that for me that's that's called a strategy so a strategy is a set of actions that you have planned and each action will be based on what has been what has happened before their action okay so these are conditional actions a social norm is a conditional set of actions that everybody follows that's why we call it social okay and it could be pure customs Christmas comes certain behavior behavioral and outsider will find Italians behaving somewhat interestingly before Christmas some things and people expect each other to do it what happens if you don't do it that's the key thing for a norm to be a norm it must be the case that it's in the interest of each of the parties to abide by the norm otherwise it would not be annoying when would it be in the interest of the authority to abide by the law so the idea of the norm here is social norm is a social norm is set of behavioral rules is a social norm if following it is in the interest of each party on the assumption that all the other parties are following that norm that condition is extremely important if you think that everybody else is following the norm and it is in your interest to follow the norm it need not be by the way but suppose it is and if that is true for everybody then if everybody thinks that the other everybody else is following the norm then everybody will follow the norm it'll hang together through mutual expectations so the norm needs to be in the interest of each per Sparty provided everybody else is following the norm that's very important the second condition is extremely important because it could be that even if you have the norm in place the norm being let me give you an example so if you've taken out an agreement about say insurance I help you now you're in need and you will help me when I'm in need okay I mean need somebody helps me then tomorrow that same person is in need comes to me for help and I say I'm sorry I can't help you okay I've broken the norm so the norm is that you if you have accepted health you repay you practice reciprocity now the basis of this mutual enforcement lies in the possibility that society and this is a very key part of it that society is in some sense stable it's going to be there tomorrow day after day after tomorrow and the day after and so forth people can migrate but the migration needs to be correlated nomadic tribes in Africa migrate but they migrate together following the water holes in the semi-arid areas so it's not so much my great but it's coordinated migration if you're of course in a sedentary occupation in one particular country or a particular village let us say you meet each other every year every day every year life goes on you die but your son is there or your daughters are there and so the dynasty goes on now you can see where I'm heading a social norm operates and can operate in principle because there is always a tomorrow the punishment will be withdrawal of help when I'm in need in the future that's the punishment that's the mutual enforcement the punishment doesn't come from an external enforcer but from withdrawal of cooperation in the future if you cease to cooperate any stage of the game that's the threat that's the social norm so the social norm says whatever the agreement is you're doing it say there is a prosody one but that if somebody fails then the norm also has a negative side to it which is withdrawal or cooperation with the person who broke the agreement that's the punishment because then he will lose by having to work alone rather than with others for the mutually advantageous course of action so the forth thing has shown us that time is important a society which lifts are only one period none of this is going to work okay so that's a very good clue it's telling us another thing that even if it's going to be there tomorrow if people have very strong doubts about whether there will be a tomorrow between these people each other that is then again it won't work that is why you cannot have norms of behavior strictly speaking in a very mobile society you live in a apartment house in Los Angeles and you don't know your neighbor the reason is that yesterday's neighbor is not today's neighbor or not tomorrow's neighbor they're constantly moving in and out now in that kind of a world you're not going to have reciprocity I mean maybe with bread and butter maybe with a bit of milk or coffee yes that's that's the pro-social part of it but if it comes to $1,000 or loan no because you don't know whether the person will be there tomorrow and so although there is a future tomorrow that person doesn't personify that future so we learn another thing which is something like cohesion in a society some kind of a link which persists over time is required for for to work okay a further reason further requirement is that in some sense that link should not be broken that link could be broken because of one reason I just mentioned that people are mobile individually mobile but it could be also because you've got a predatory state which is trying to destroy the community this has happened in Africa over and over again in the last 40 years but the state interferes enters a rural community and says you do not have the authority to for these transactions it's the state we are responsible you have to come to us for you know that it's moving from four to three but if you move from four to three and the state is either corrupt or inept then the people in question the parties fall down again okay so this is just a very rough background but the point key point is that this norms that I mentioned is also a way of understanding external enforcement and some of the early work on social capital was trying to show that Robert putnams work on it Italy was designed to argue that social capital in the sense that I'm talking about now social norms of behavior are required necessary to discipline the state discipline the center the state and therefore make it more plausible that people could trust the state the external enforcer to enforce the agreement so even three the external enforcement at some level can only be explained through the operations of the citizens and that's why four is in some sense the basis on which everything else follows in social life let me try and summarize now in their modern form markets operate under the rule of law and the external enforcer is the state in the Christian notion of markets markets are institutions and they are very different and that's their they're the institutions that we economists study all the time but what we don't study very much and that's what I have trying to open up at this wonderful festival is the idea that we should be studying communities also communities are a very different kind of institution and communitarian institutions are the basis of their functioning is of course social norms we I mean of course within a community of people also signed contracts we live in a world in which there are many institutions which are operating simultaneously we operate in many institutions simultaneously we're in a household we are in it in our club we are in we operate in the market we are in the community we operate our citizens and so forth no question about that but it's useful to think about extreme forms of institutions to see how they operate and what I'm suggesting is that so much of our transactions even in the West even in the North operate through not through markets nor through the states but through communities informal agreements informal transactions based on mutual expectations and I've tried to give you a sense of how that works so social capital in my way of thinking consists of interpersonal networks it is the basis on which Trust is created and maintained and the beauty of it is that that trust can be maintained even among people who do not know one another now why and the reason is that if you have this if the groups of people who trust one another and then have legs through the states and the states are government through the rule of law then you can trust through your transactions people whom you have never met not because you like them or they like you but there is a chain of mutual expectations including fear of punishment in case of malfeasance that might be working through norms or might be working through the rule of law it doesn't matter but when you are a transaction you are buying a commodity which was let us say produced in China and it has been carried all this way and found itself in a market here and you purchase it you are in some say entrusting the Chinese produced them who you do not know and he is trusting that his product is going to find their market and you'll be you'll be paid for it now if you now think through the chain by which that transaction has taken place you will find that at every stage it is either the rule of law or the social norm which has been operating to keep that transaction the expectation of a fulfilled transaction in place so obviously the world is run through in my judgment through all for all for unnecessary but for largest transactions outside the household outside mutual affection it seems to me the basis is something like mutual enforcement because that's the basis on which everything else hands simply to say there is a rule of law means nothing every community that I have ever studies says that civil servants must be honest there is no Constitution which says the government should cheat unthinkable this has happens in Nigeria it'll happen in Congo it before in zire mabu toe no doubt it was all in trying but in some places the expectations failed others they have stayed and that and we want to end by saying that's where I hit a roadblock all I've been talking to you about is how it is possible for people to entertain expectations if social norms are adequately formed that the threat the the the the threat of sanctions that are embedded in social norms prevents people from breaking them and so your hanging together with promises being kept and people trust one another rationally to carry out what they said they would do but in that same society suppose by some bad magic some black magic everybody doubted everybody else that no he's not going to follow the norm and he says no she won't follow the norm then each would find it in his interest to withdraw from the cooperation because rationally says the others aren't following that knot what to follow the norm they will cheat so why should I enter the transaction and that mutual expectation is also hopefully at the end of the day nobody transacts you have a very unprecedented own my gosh that was a good thing I didn't transact because they're all cheats out there and everybody's saying that so even if the fundamentals of society are correct you could have one outcome which is good another outcome which is bad question to which I have no answer how is it how can you prepare the society to get into that mutually confident or mutually respecting expectations such that you hang together at a corporate corporate at a transaction which are cooperative as opposed to one where you have essentially given up either you become atactic or you've gone to the street with swords and daggers and fighting each other we economies do not have an answer to that as to how that expectation is formed but we now know at least in a way that we did not 15 20 years ago that that's at the heart of the social problem thank you very much Gracia part of the scooped up a quest Illumina until it's Yana Katie thanks to this enlightening presentation on social capital and for leading us into these complex aspects which normally those who analyze the economic behavior of people as the scoop does give for granted give as a starting point now there is some time for the questions or comments points of curiosity I'm Jack Werner I teach check Turner in senior economy in cuesta university' echo question especially the future prima differ in a comment Playa / lotto del mercato communities should I keep the microphone Rosa can you hear me now you make a neat rather neat distinction between markets on the one hand which you need per se the state as a sort of guarantor for transactions to be carried out and communities are the other hand where trust is much more important I see much more of a continuity between both which is something that is based also on work by network sociologists such as Harrison white and Bob Byrd who in a way I have put the discipline of economics to shame because they made more progress in explaining how markets really function very briefly markets function and are stable and continue to exist if the perception of both sides to the market the demanders and suppliers are sufficiently home ruined you can't have a state stepping in for that or substituting for a lack of congruence of expectations which by the way is something Adam Smith already thank you very much I think I will take the questions as they come because other I tend to forget I quite agree with you this it's not it we don't have a disagreement at all these are sharp distinctions because they take us in different basis but I ended by saying we live in a mixed environment and every one of them has to do with their related except for the fact that the external enforcement aspect of it I'm pretty convinced now because it involves people and not a computer we are really at the end of the day coming back to something like mutual enforcement however since you've asked me a very good question that me try and elaborate on one thing which I did not have time to discuss that these are important things for us to think about one reason this is a useful subject to begin a festival with by the way is that we all can think about social capital you can all think through it extend it whether you come from economics or not it's not irrelevant because we are citizens in some sense and that one is that there is a weakness in communities there are many weaknesses of communities by the way I mean the negative side I have not talked about here one weakness is that it's very limiting strictly speaking community or agreements which are through mutual enforcement are personalized so these transactions are personalized you are giving me the object not cheap so it's a names matter when you talk about reputation names matter it's not a shock it's a particular name of a shop the person in it and in something again in an extreme although again like the question the gentleman who asked the question the things are blood but the fact their blood doesn't mean that there isn't a difference this is the difference I want to hint that the markets have the advantage for the ideal form of markets is that they are anonymous so when somebody says my money is as good as yours that sounds very vulgar but it makes a point which says that the transaction is not named it is not a personal one it's impersonal the second difference is it's a little more tricky but in the external enforcement the whether or not people have complied with the agreement must be in some sense observable publicly and that's why you need lawyers you have law courts you're trying to verify that something actually happened which has being claimed as having happened or didn't happen if it's claimed that it didn't happen whereas in mutual enforcement you need to the parties need to observe whether they have been complied nobody else needs to know you don't have to go to that law courts to prove something in their extreme forms so these distinctions are very important because they tell us what will work when and why not it's important to recognize these things because we live in urban societies but suppose you might imagine that norms that will develop in a forest people who live in the forests the Amazon will be very different from the norms that would develop let us say in a mountain region or that will develop in a coastal plain or in a river valley because what can be observed what can't be observed or the tenuous mountains you can hide and so forth make observations are very costly so these are hints I'm trying to give you because when you think about the next time you buy something or you promise something and you ask well what's the promise credible or the purchase reasonable these are some of the questions that you would want to ask yone see certain pasado can you hear me can you hear me at one point a new presentation you said that in very mobile societies social norms that may be weakened by this high mobility but you know a lot in societies where mobility is not very marked we have the impression however that these are social norms are not present or that a social capital is based on something there are limited something which remains within the framework of families or small groups don't you think that the more mobile er is a society and the stronger the need for social norms oh these are all extremely hard questions the very deep questions yes I quite agree why does this happen though mobility I was arguing uncoordinated mobility of the Los Angeles variety Southern California variety makes it very hard for social capital to develop but that doesn't of course the negation of that is not that people who are not mobile social capital will necessarily develop I wasn't suggesting that and in fact I was suggesting that you could have mutual expectations which are completely absent I mean good mutual expectations banfield very famous book on edwin man banfield 1957 book was of a completely dysfunctional community which was not mobile it was very stagnant but people were in the equilibrium that I was describing at the end where everybody mistrusted everybody okay so that can happen of course but there is something that in your question that I think is very deep and very difficult to understand at least I don't understand it there's some substitution effect that takes place you see one reason anthropologists love communities and very often development economists or development activists love communities and why many of my hardened economics economics friends talk about social capital as something very positive in positive terms who 20 years ago would never have done so find that when they're going to village communities in Africa Asia South Asia they find that so much of the the society is being kept alive through these reciprocity reciprocity Arrangements embedded in what we call now social capital credit insurance and so forth these are two extremely important transactions credit and insurance by the way and they're happening within the community no there are no big firms out there there's no stock market or anything like that now it's one thing to say that if society has found the community has found a way to live to survive another thing to say that it's a very efficient system so it's very easy to say that there's something wonderful about these communitarian arrangements because without them of course they would not survive but it's not an argument for saying that's how they should stay because we feel the state ought to be engaged ought to be helping building roads so that they can actually transact outside the village diversify their risks further by taking insurance out with people who are far away from them not with people whose risks are correlated with themselves she's not much point in a farmer ensuring his neighboring farmer because if there is a drought both are going to get hit and so when one is in need the other is in need and when the other is in need one is in need so they can't help each other but what you need is a situation where if I'm in need you may not be in need and vice versa so you need distance so there is some kind of placement effect that takes place and how we adjust that displacement is the thing the welfare state comes along let us say before which there was no welfare state okay then if you care about inequality or poverty you have to get together as citizens and create methods by which transfer of funds can be made to those who are destitute soup kitchens or whatever you can think of those things and that requires communitarian activity we are now in social norm but the norm is that we help the poor progressive state comes along there is a official welfare legislation and is carried out citizen says well why do I have to do this the state is supposed to be doing that so a whole bunch of communitarian activities are no longer followed because it's the normal course of events that if somebody falls ill he will go to the required Department for help so there is a transfer from transactions which take place at the communitarian level to transactions which take place elsewhere and that balance may not be done it may happen that the balance doesn't add a the transit the transfer doesn't take place as well as we like but there is a gain a net loss and maybe the gain is I don't know but that seems to me to be what made might be happening where the state at least in England you get a distinct sense that so much of the burden of citizenship is now transferred to the state's Authority if you very ill you are unemployed it is a state which looked out for you not your neighbor so it's now only transaction in milk or when I run out of onions and I go to my neighbor and saying your cooking chops are closed can I have an onion that's fine but if you need a loan there's a bank out there and so forth is your Travie yo credo GC espacio para para una sola de man well a very final question see later where the casella's in your request I have a question for you so social capital is based on trust so we need a moral basis to create a series of links enabling everybody to progress and grow well those who violate these norms that need to be punished well in your opinion the expectation of a punishment well should we go as high as the death penalty and this based on a rational economic reasoning which I don't share but which is applied in China for example where we're really at the beginning with reference to the application of human rights and just yesterday death penalty was given to some people who had marketed counterfeit pharmaceuticals and medicines well I'd like to have your opinion on this that's only friends can ask nasty questions like that and we are friends now that's that's a very difficult question you have asked norms for any well ordered society it's quite clear and I was highlighting that that norms must involve penalties for malfeasance it goes out saying that's fine you're asking about the size of the penalty essentially of course there's always these things that we couldn't discuss there's not time observing or verifying depending on whether you're working on mutual enforcement or whether you're working on external enforcement they're always imperfect one of the arguments against the death penalty in the West has been that it's an irreversible punishment the person dies and there's always the sneaking worried that the evidence was not foolproof so that's been a standard argument if you talk to my wife she is very much against the death penalty not against it she just thinks it's out of the question why she'll give you always that answer that there's always little doubt so you can then reverse the error if five years later you find the person hadn't been guilty after all and there are cases like that that come up and so that's the argument but the you're talking about that penalty one doesn't have to go to that he nevertheless the question really is should we have stiffer norms stiffer sorry stiffer punishments enshrined in the norms or if it's the rule of law should defines or the punishments penalties be higher probably should at least in some societies in some of my more depressed moments in England I feel yes there is but when I say punishment again it depends on where it is we don't seem to have much in the form of punishment for what mean regard typically as minor misbehavior graffiti on the wall or something on the other hand there are some sociologists who argue that eliminating those mouthpiece senses helps in eliminating the larger ones because it's this spiral you start and you try out to see how far you can get away by misbehaving and then the more you can get away with it the more risk you take or the bigger deal and so forth there are some theories of that sort I don't know how valid they are it's a matter of judgment and I can't obviously for me too since this covers the whole of life it's hard to know which one should be tightened and what shouldn't I suspect in contemporary societies when civil civic behavior in industrial societies like in England is really eroding there is a case for some stiffer fines if you like now what the fine is whether its financial or public service or what I don't know that's something discussed but taking life it's that's a hard one I couldn't answer that really because there's as I say observing is always structure with some uncertainty as is verification gracias I mean thank you sir well very briefly I have a question for you a general question very briefly where financial capital is predominant and where there is the economic power of some social classes which is predominant and when the power is unilateral and when multinationals are predominant and are not speaking about politics here well in those cases it is difficult to have Social Development to have social equity because if the objective is only of a financial nature it is difficult to imagine that some social classes can be mobile get out of poverty for example and go up the social ladder and the dominant classes will not leave any spaces many multinationals are so powerful they are even more powerful than the states themselves even in the Western world I don't want I don't know if you have a comment on this I'm afraid I'm going to disappoint you I really have very little way of observing I think there is much in what you say on the other side of things people let's say in England Western Europe are surely on average much better off now than they were in many in in the material goods I don't mean spiritually but in the material sense than they were in the 50s even 60s that despite the multinationals but I think there is a lot in what you say but sometimes I wonder whether we pick up the mouthpiece senses of multinationals and forget the perhaps many of the virtues of having large-scale transactions that are possible through great distances so when a multinational is found to have cheated or when the books were cooked or where a product was badly designed or impurities then we read about it rightly and of course the reason we read about it is because we have a free press I mean when I say we I mean this part of the world EU let's say and we have a pre pest because the state cannot mess around with it and the reason the state cannot miss round it is because there is a general agreement among citizens that the Free Press is a good thing and so you're hanging together with these mutual expectations so it's it's correct that we these bad features are multinationals are highlighted but you don't really see very often articles talking about the general behavior of transacting getting things that lowering prices competing so that the average consumer can get things at a lower price than he did and so forth so I think my guess is that these institutions have a mixed record some good obviously some bad and maybe we overly highlight the bad things as regards power I don't know happy I mean you're right each of us is powerless quite right you know if you live in a society with 1 million people in your community in your state then you're just 1 million and money can talk there of course people have votes in their pockets and so forth but at least we muddle along and I think when we who are very fortunate to live in the European Union and and I think we are much the most fortunate people on earth when we feel bad about things I think we should think about societies which are absolutely ghastly and they exist and I'm not talking about poverty now I'm talking about the basis on which the poverty is kept maintained sustained which is lousy governments predatory warlords suspicious people people neighbors killing each other so I think you're both right and wrong let's put it that way ok bene grazie a tutti pelipper teaching passione Bona prosecutor Nicole