Externalities of social capital : the role of values, norms and networks

The economic perspective on values and norms shows that they may bring about externalities for the society as a whole. This possibility of market failure provides a good reason for the government to follow closely the developments in values and norms, and the resulting behaviour in communities and networks. It justifies the initiative of Prime Minister Balkenende to organise the debate on these matters in the Netherlands (and, under the Dutch EU-presidency, in Europe). Networks can be associated both with positive (Putnam type) and with negative (Olson type) externalities. This paper discusses the various influences of values, norms and networks on socio-economic welfare and provides empirical evidence on these relationships. The focus of our own empirical analysis is on the Netherlands. Trust as part of social capital, and the role that values, norms and networks play as co- ordination mechanism, form important aspects both in the theoretical and in the empirical analysis. It appears that there has been no obvious decrease in these aspects of social capital in the Netherlands. It contrasts the findings of Putnam for the US.