Obsolescence and Decline of Social Capital
20 Pages Posted: 20 May 2004
Date Written: May 2004
This paper formalizes a theory of the obsolescence and decline of social capital based on the interplay between social capital and the flexibility of productive resources. In our economy, agents with specific skills are held up by their principals. Inside communities, agents learn about each other and thereby engage in mutual aid, preventing the hold-up. As agents learn about each other, they share skills and gain flexibility. In the long run, this may render mutual aid obsolete, causing its decline.
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