A Metric for Social Capital

Social capital has value, but unlike most valuable things, it cannot, at present, be quantified and sold on the market. Before social capital can be valued as a product or commodity, it must be measurable with a reliable metric and in real time. Social capital is defined by the OECD (Organisation for Economic Co-operation and Development) as “networks together with shared norms, values and understandings that facilitate co-operation within or among groups” (OECD 2001). Based on real-world links among groups and individuals, social capital is the essential glue upon which groups, organizations and society function and survive.

The World Bank’s efforts to estimate the “true wealth of nations” suggest that intangible capital, made up mainly of human and social capital, represents around 60-80% of true wealth in most developing countries (Kevin 2018). However, social capital is not measured in standard accounting. Although some researchers have tried to estimate the value of social capital assets as a proportion of total wealth (Hamilton 2013), social capital differs from natural and human capital as it is a broad concept, based largely on multidimensional interpersonal relationships. Thus, it is very challenging to measure. In fact, without a comprehensive view of the underlying mathematics, previous attempts to quantify social capital accurately are laborious and rudimentary compared to other scientific metrics.

Measurement is one of the most fundamental concepts in science. With the ability to quantify and communicate, scientists can conduct experiments or form theories. To design an accurate measure, it must be understood that social capital is an aggregate concept addressing not only interactions within a group, but also individual behavior, attitude, and predisposition. The problem of measuring or even estimating the presence of these interactions and the trust that underlies them inside a busy social network is a challenging one. (Michell 1997a,b)

Too often, the difficulty of applying a metric to intangible, qualitative values (such as “trustworthiness”) neglects their impact in social analytics and shifts the emphasis to variables that can be measured with a greater degree of confidence. Unless the value of social capital can be quantified, political and business leaders are more likely to neglect it in their decision-making. This omission ignores the critical value of social capital in the success of a country or organization.

At the end of the 19th century, Francis Galton stated “until the phenomena of any branch of knowledge have been submitted to measurement and number, it cannot assume the status and dignity of science” (Galton 1879). Stanley Smith Stevens, the preeminent Harvard psychologist, was a leading figure in developing a theory of measurement that was unique to the social sciences. He first introduced his theory of measurement in a 1946 article in the journal Science entitled “On the Theory of Scales of Measurement.” Stevens defined measurement as “the assignment of numerals to objects or events according to some rule.” This definition contested the established definition of measurement, guiding other scientific pursuits as the ascertainment of the weight, size, or temperature (attributes, in brief) of some object or event by comparison to a standard unit.

Developing an accurate measurement of social capital would unlock vast potential, enabling qualitative data to contribute significantly to all aspects of society. With an accurate measurable system, the future viability of countries and organizations would improve through correctly identifying and evaluating this intangible asset. (Putnam 2000, Putnam et al. 1992, Harraka 2002, Putnam 1993, Tisdale 2008)

From this perspective, it’s easy to see why increasing social capital, even by a few percent, could lead to countries’ greater economic performance.

Currently, the prevailing method of measuring social capital uses standard questionnaires. The “amount” of social capital in a given community is then extrapolated from the results of the questionnaire.

The following graph illustrates that as degrees of trust increase, so does GDP.

Figure 1: Trust vs GDP

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