Adam Smith, the father of modern economics, observed that humans possess “principles in their nature, which interest them in the fortune of others.” Smith’s emphasis on sympathy, what we now call empathy, reveals the foundation of social capital: our capacity to internalize others’ well-being and act in ways that benefit the group.  

While there is no single universally accepted definition of social capital, economist Lindon Robison defines it as “the empathy one person or group has for another person or group.” This complements the World Bank’s definition: “the institutions, relationships, and norms that shape the quality and quantity of a society’s social interactions.” The essence of social capital is the strength and quality of our relationships.  

The benefits of social capital include increased trust and cooperation, reducing the need for constant oversight or costly enforcement. People who are part of social capital networks often give each other preferential treatment, such as lower prices or special access to resources. They tend to work together to produce public goods, like clean parks and safe neighborhoods, and discourage behaviors that impose costs on others. People in social capital networks tend to feel a greater sense of belonging, have more friendships, and report higher levels of happiness. Moreover, these networks often reinforce societal stability by supporting institutions and norms beyond their immediate networks.  

Robison warns about the adverse effects of negative social capital. Negative social capital arises when people form networks based on shared antipathy towards outside persons, groups, or objects. Negative social capital often emerges in contexts when people feel excluded, perceive injustice, institutions are weak, society is polarized, or when individuals fear and distrust one another. Examples include partisan political networks that demonize opponents, communities that blame outsiders for local problems, sports fans who belittle their opponents, and toxic workplaces where people mistrust and vilify each other.  

Negative social capital is easier to create and maintain but produces inferior outcomes. While antipathy and enmity can unite people against perceived threats, they also deepen the very conflicts that people are seeking to resolve. For example, in the novel Lord of the Flies, a group of stranded schoolboys initially attempt self-governance, but fearing a mythical beast, they unite under Jack, a leader who promises protection. The fear-based unity quickly devolves into savagery, turning the boys against dissenters and leading to violence and societal collapse.  

Adam Smith understood that markets and societies function more effectively when positive social capital is more prevalent than negative social capital.