Social Capital (Session 7)

Question 1

Is the state or market uniformly successful in solving the common pool resource (CPR) problem?

Answer 1

neither, Ostrom argues that rather than a single best solution, many solutions exist to cope with different problems
- Successful institutions are rarely either private or public
- They are often “private-like” and “public-like” institutions

Question 2

When do self-enforced institutional arrangements work?

Answer 2

Internal factors:
- Communication, trust, social capital, similar interests, common fate, not too much heterogeneity (in power distribution and technology)
External factors:
- If participants have the autonomy to change their institutional structure and aren’t contained by authorities (government)
- If the change in institutions is normal, too fast will lead to insufficient time to adjust to internal structures
New Institutions
- Ostrom argues that new institutions are more likely to work in these situations

Question 3

Why do self-enforced institutional arrangements work? Are there any faults?

Answer 3

Participants will be more likely to come up with successful solutions to dealing with free-riding, solving commitment problems, arranging for the supply of new institutions, monitoring individual compliance rules

However, we still do not have good rational choice theories to solve the kind of CPR problem involving non-renewable resources, multinational resources, and situations where users can harm each other and could produce major external harm to others

Question 4

Robert Putnam belief

Answer 4

Differences in performance are driven by differences in social capital
High capital = Strong society
which leads to a strong economy and a strong state

Question 5

What is Social Capital?

Answer 5

Embodied in social networks, relations among individuals

Social capital is the “third” form of capital in an economy
1) Physical capital (material objects: totally tangible)
2) Human Capital (Skills and knowledge)