Social Capital in Creation of Human Capital Article Analysis in one or two pages double spaced, provide a critical analysis of the ideas presented in the r

Social Capital in Creation of Human Capital Article Analysis in one or two pages double spaced, provide a critical analysis of the ideas presented in the reading. Social Capital in the Creation of Human Capital
Author(s): James S. Coleman
Source: American Journal of Sociology, Vol. 94, Supplement: Organizations and
Institutions: Sociological and Economic Approaches to the Analysis of Social Structure
(1988), pp. S95-S120
Published by: The University of Chicago Press
Stable URL:
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Social Capital in the Creation
of Human Capital’
James S. Coleman
University of Chicago
In this paper, the concept of social capital is introduced and illus-
trated, its forms are described, the social structural conditions
under which it arises are examined, and it is used in an analysis ol
dropouts from high school. Use of the concept of social capital is
part of a general theoretical strategy discussed in the paper: taking
rational action as a starting point but rejecting the extreme individualistic premises that often accompany it. The conception of social
capital as a resource for action is one way of introducing social
structure into the rational action paradigm. Three forms of social capital are examined: obligations and expectations, information
channels, and social norms. The role of closure in the social structure in facilitating the first and third of these forms of social capital
is described. An analysis of the effect of the lack of social capital
available to high school sophomores on dropping out of school before graduation is carried out. The effect of social capital within the
family and in the community outside the family is examined.
There are two broad intellectual streams in the description and explana-
tion of social action. One, characteristic of the work of most sociologists,
sees the actor as socialized and action as governed by social norms, rules,
and obligations. The principal virtues of this intellectual stream lie in its
ability to describe action in social context and to explain the way action is
shaped, constrained, and redirected by the social context.
The other intellectual stream, characteristic of the work of most econo-
mists, sees the actor as having goals independently arrived at, as acting
independently, and as wholly self-interested. Its principal virtue lies in
having a principle of action, that of maximizing utility. This principle of
action, together with a single empirical generalization (declining marginal
utility) has generated the extensive growth of neoclassical economic the-
1 I thank Mark Granovetter, Susan Shapiro, and Christopher Winship for criticisms of
an earlier draft, which aided greatly in revision. Requests for reprints should be sent to
James S. Coleman, Department of Sociology, University of Chicago, Chicago, Illinois
? 1988 by The University of Chicago. All rights reserved.
AJS Volume 94 Supplement S95-S120 S95
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American Journal of Sociology
ory, as well as the growth of political philosophy of several varieties:
utilitarianism, contractarianism, and natural rights.2
In earlier works (Coleman 1986a, 1986b), I have argued for and en-
gaged in the development of a theoretical orientation in sociology that
includes components from both these intellectual streams. It accepts the
principle of rational or purposive action and attempts to show how that
principle, in conjunction with particular social contexts, can account not
only for the actions of individuals in particular contexts but also for the
development of social organization. In the present paper, I introduce a
conceptual tool for use in this theoretical enterprise: social capital. As
background for introducing this concept, it is useful to see some of the
criticisms of and attempts to modify the two intellectual streams.
Both these intellectual streams have serious defects. The sociological
stream has what may be a fatal flaw as a theoretical enterprise: the actor
has no “engine of action.” The actor is shaped by the environment, but
there are no internal springs of action that give the actor a purpose or
direction. The very conception of action as wholly a product of the environment has led sociologists themselves to criticize this intellectual
stream, as in Dennis Wrong’s (1961) “The Oversocialized Conception of
Man in Modern Sociology.”
The economic stream, on the other hand, flies in the face of empirical
reality: persons’ actions are shaped, redirected, constrained by the social
context; norms, interpersonal trust, social networks, and social organization are important in the functioning not only of the society but also of the
A number of authors from both traditions have recognized these
difficulties and have attempted to impart some of the insights and orientations of the one intellectual stream to the other. In economics, Yoram
Ben-Porath (1980) has developed ideas concerning the functioning of
what he calls the “F-connection” in exchange systems. The F-connection
is families, friends, and firms, and Ben-Porath, drawing on literature in
anthropology and sociology as well as economics, shows the way these
forms of social organization affect economic exchange. Oliver Williamson
has, in a number of publications (e.g., 1975, 1981), examined the conditions under which economic activity is organized in different institutional
forms, that is, within firms or in markets. There is a whole body of work
in economics, the “new institutional economics,” that attempts to show,
2 For a discussion of the importance of the empirical generalization to economics, see
Black, Coats, and Goodwin (1973).
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Social Capital
within neoclassical economic theory, both the conditions under which
particular economic institutions arise and the effects of these institutions
(i.e., of social organization) on the functioning of the system.
There have been recent attempts by sociologists to examine the way
social organization affects the functioning of economic activity. Baker
(1983) has shown how, even in the highly rationalized market of the
Chicago Options Exchange, relations among floor traders develop, are
maintained, and affect their trades. More generally, Granovetter (1985)
has engaged in a broad attack on the “undersocialized concept of man”
that characterizes economists’ analysis of economic activity. Granovetter
first criticizes much of the new institutional economics as crudely functionalist because the existence of an economic institution is often explained merely by the functions it performs for the economic system. He
argues that, even in the new institutional economics, there is a failure to
recognize the importance of concrete personal relations and networks of
relations-what he calls “embeddedness”-in generating trust, in establishing expectations, and in creating and enforcing norms.
Granovetter’s idea of embeddedness may be seen as an attempt to
introduce into the analysis of economic systems social organization and
social relations not merely as a structure that springs into place to fulfill
an economic function, but as a structure with history and continuity that
give it an independent effect on the functioning of economic systems.
All this work, both by economists and by sociologists, has constituted a
revisionist analysis of the functioning of economic systems. Broadly, it
can be said to maintain the conception of rational action but to superim-
pose on it social and institutional organization-either endogenously
generated, as in the functionalist explanations of some of the new institu-
tional economists, or as exogenous factors, as in the more proximatecausally oriented work of some sociologists.
My aim is somewhat different. It is to import the economists’ principle
of rational action for use in the analysis of social systems proper, including but not limited to economic systems, and to do so without discarding
social organization in the process. The concept of social capital is a tool to
aid in this. In this paper, I introduce the concept in some generality, and
then examine its usefulness in a particular context, that of education.
Elements for these two intellectual traditions cannot be brought together
in a pastiche. It is necessary to begin with a conceptually coherent framework from one and introduce elements from the other without destroying
that coherence.
I see two major deficiencies in earlier work that introduced “exchange
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American Journal of Sociology
theory” into sociology, despite the pathbreaking character of this work.
One was the limitation to microsocial relations, which abandons the prin-
cipal virtue of economic theory, its ability to make the micro-macro transition from pair relations to system. This was evident both in Homans’s
(1961) work and in Blau’s (1964) work. The other was the attempt to
introduce principles in an ad hoc fashion, such as “distributive justice”
(Homans 1964, p. 241) or the “norm of reciprocity” (Gouldner 1960). The
former deficiency limits the theory’s usefulness, and the latter creates a
If we begin with a theory of rational action, in which each actor has
control over certain resources and interests in certain resources and
events, then social capital constitutes a particular kind of resource available to an actor.
Social capital is defined by its function. It is not a single entity but a
variety of different entities, with two elements in common: they all consist
of some aspect of social structures, and they facilitate certain actions of
actors-whether persons or corporate actors-within the structure. Like
other forms of capital, social capital is productive, making possible the
achievement of certain ends that in its absence would not be possible.
Like physical capital and human capital, social capital is not completely
fungible but may be specific to certain activities. A given form of social
capital that is valuable in facilitating certain actions may be useless or
even harmful for others.
Unlike other forms of capital, social capital inheres in the structure of
relations between actors and among actors. It is not lodged either in the
actors themselves or in physical implements of production. Because purposive organizations can be actors (“corporate actors”) just as persons
can, relations among corporate actors can constitute social capital for
them as well (with perhaps the best-known example being the sharing of
information that allows price-fixing in an industry). However, in the
present paper, the examples and area of application to which I will direct
attention concern social capital as a resource for persons.
Before I state more precisely what social capital consists of, it is useful
to give several examples that illustrate some of its different forms.
1. Wholesale diamond markets exhibit a property that to an outsider is
remarkable. In the process of negotiating a sale, a merchant will hand
over to another merchant a bag of stones for the latter to examine in
private at his leisure, with no formal insurance that the latter will not
substitute one or more inferior stones or a paste replica. The merchandise
may be worth thousands, or hundreds of thousands, of dollars. Such free
exchange of stones for inspection is important to the functioning of this
market. In its absence, the market would operate in a much more cumbersome, much less efficient fashion.
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Social Capital
Inspection shows certain attributes of the social structure. A given
merchant community is ordinarily very close, both in the frequency of
interaction and in ethnic and family ties. The wholesale diamond market
in New York City, for example, is Jewish, with a high degree of intermarriage, living in the same community in Brooklyn, and going to the same
synagogues. It is essentially a closed community.
Observation of the wholesale diamond market indicates that these close
ties, through family, community, and religious affiliation, provide the
insurance that is necessary to facilitate the transactions in the market. If
any member of this community defected through substituting other stones
or through stealing stones in his temporary possession, he would lose
family, religious, and community ties. The strength of these ties makes
possible transactions in which trustworthiness is taken for granted and
trade can occur with ease. In the absence of these ties, elaborate and
expensive bonding and insurance devices would be necessary-or else the
transactions could not take place.
2. The International Herald Tribune of June 21-22, 1986, contained
an article on page 1 about South Korean student radical activists. It
describes the development of such activism: “Radical thought is passed
on in clandestine ‘study circles,’ groups of students who may come from
the same high school or hometown or church. These study circles . . .
serve as the basic organizational unit for demonstrations and other protests. To avoid detection, members of different groups never meet, but
communicate through an appointed representative.”
This description of the basis of organization of this activism illustrates
social capital of two kinds. The “same high school or hometown or
church” provides social relations on which the “study circles” are later
built. The study circles themselves constitute a form of social capital-a
cellular form of organization that appears especially valuable for facilitating opposition in any political system intolerant of dissent. Even where
political dissent is tolerated, certain activities are not, whether the activities are politically motivated terrorism or simple crime. The organization
that makes possible these activities is an especially potent form of social
3. A mother of six children, who recently moved with husband and
children from suburban Detroit to Jerusalem, described as one reason for
doing so the greater freedom her young children had in Jerusalem. She
felt safe in letting her eight year old take the six year old across town to
school on the city bus and felt her children to be safe in playing without
supervision in a city park, neither of which she felt able to do where she
lived before.
The reason for this difference can be described as a difference in social
capital available in Jerusalem and suburban Detroit. In Jerusalem, the
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American Journal of Sociology
normative structure ensures that unattended children will be “looked
after” by adults in the vicinity, while no such normative structure exists
in most metropolitan areas of the United States. One can say that families
have available to them in Jerusalem social capital that does not exist in
metropolitan areas of the United States.
4. In the Kahn El Khalili market of Cairo, the boundaries between
merchants are difficult for an outsider to discover. The owner of a shop
that specializes in leather will, when queried about where one can find a
certain kind of jewelry, turn out to sell that as well-or, what appears to
be nearly the same thing, to have a close associate who sells it, to whom
he will immediately take the customer. Or he will instantly become a
money changer, although he is not a money changer, merely by turning to
his colleague a few shops down. For some activities, such as bringing a
customer to a friend’s store, there are commissions; for others, such as
money changing, merely the creation of obligations. Family relations are
important in the market, as is the stability of proprietorship. The whole
market is so infused with relations of the sort I have described that it can
be seen as an organization, no less so than a department store. Alterna-
tively, one can see the market as consisting of a set of individual merchants, each having an extensive body of social capital on which to draw,
through the relationships of the market.
The examples above have shown the value of social capital for a num-
ber of outcomes, both economic and noneconomic. There are, however,
certain properties of social capital that are important for understanding
how it comes into being and how it is employed in the creation of human
capital. First, a comparison with human capital, and then an examination of different forms of social capital, will be helpful for seeing these.
Probably the most important and most original development in the economics of education in the past 30 years has been the idea that the concept
of physical capital as embodied in tools, machines, and other productive
equipment can be extended to include human capital as well (see Schultz
1961; Becker 1964). Just as physical capital is created by changes in
materials to form tools that facilitate production, human capital is created
by changes in persons that bring about skills and capabilities that make
them able to act in new ways.
Social capital, however, comes about through changes in the relations
among persons that facilitate action. If physical capital is wholly tangible,
being embodied in observable material form, and human capital is less
tangible, being embodied in the skills and knowledge acquired by an
individual, social capital is less tangible yet, for it exists in the relations
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Social Capital
among persons. Just as physical capital and human capital facilitate productive activity, social capital does as well. For example, a group within
which there is extensive trustworthiness and extensive trust is able to
accomplish much more than a comparable group without that trustworthiness and trust.
The value of the concept of social capital lies first in the fact that it
identifies certain aspects of social structure by their functions, just as the
concept “chair” identifies certain physical objects by their function, de-
spite differences in form, appearance, and construction. The function
identified by the concept of “social capital” is the value of these aspects of
social structure to actors as resources that they can use to achieve their
By identifying this function of certain aspects of social structure, the
concept of social capital constitutes both an aid in accounting for different
outcomes at the level of individual actors and an aid toward making the
micro-to-macro transitions without elaborating the social structural de-
tails through which this occurs. For example, in characterizing the clandestine study circles of South Korean radical students as constituting
social capital that these students can use in their rev…
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