Wednesday, March 22, 2017

Complacency Or Community Commitment? Human And Social Capital Reconsidered

I have been poking at Tyler Cowen's recent book on The Complacent Class, along with those who have praised it unstintingly, with my main complaint being that what he calls complacency may really be fear.  In an exchange posted today between Tyler and Noah Smith at Bloomberg, Noah makes many of my points, saying that what people who are not moving or changing jobs are doing is seeking "safety and security," with "complacency" sounding like "blithe optimism." Tyler then admits that "many people are afraid," but then says that they are still complacent because they are not reacting "with urgency."  He also says that a lack of increased income volatility shows that they do not have reason to feel they are facing more risks than those in the past did, although it looks to me like the greater risks they face are more due to higher payments they must make for health or education rather than greater volatility of income.  But this is not what I want mostly to address here, at least further.

I wish to go back to the implications of people not quitting jobs and not moving as much as they used to. Rather than rerunning the fear versus complacency point, I want to think about how this relates to human and social capital accumulation.  In particular, I think  that while people may increase their individual human capital by moving around more, there may be an increase in social capital from people staying in one place more.  This greater social capital may result in more committing by people to the quality of their communities, more engagement in civic groups, and so  on.  It may be that the human capital part means that greater mobility improves economic growth, but this may be at the expense of better quality of life and other parts of economic growth associated with having high quality communities with high social capital.

Since I am setting up in effect a competition between human and social capital, I must admit that some of  the early work on these matters,  especially by sociologists like James Coleman and political scientists like Robert Putnam, initially argued that they were linked, that social capital enhances human capital.  Now I am not going to deny that. Certainly a person with a larger network of trusting acquaintances may be able to be more productive in their work and have essentially higher skills than someone who does not. Nevertheless, I am going to note how they may also be in conflict.

A crucial issue here involves externalities.  I  think that social capital involves and leads to more externatities than does human capital.  Or, even if I am wrong, they will involve different kinds of externalities.  So, someone who moves around a lot from job to job and state to state may well acquire more narrow technical skills that will lead them to earn more money and possibly produce more as well in their jobs than someone who stays in the same job in the same place.  Silicon Valley is full of people constantly changing their jobs, although this is a special case where while they change their jobs a lot, they do not move away, with this being a classic "industrial cluster" case, where the externalities involved mean that they must stay in the same location to get the full advantage of their human capital. Of course, we may also have the hard-to-separate out matter that those who do so  much moving and accumulating of human capital are more likely to be the ones with greater skills and education to begin with, compared to those who fearfully hang onto one job while staying in one place, and it may be that these latter are also  less able to provide all those community benefits associated with possibly accumulated social capital from staying where they are. Certainly we expect this to be true in very depressed communities with declining jobs.

The literature on social capital is voluminous, and there are competing definitions, with the leading candidates being generalized trust versus levels of civic engagement or membership in social groups.  Usually it is argued that these are correlated, but not necessarily.  Empirical  studies have tended to find the former to be more important for economic growth than the latter, as with the classic 1996 QJE paper by Knack and Keefer.  But either way, what is involved with social capital, especially "bridging" social capital that extends broadly and not just to others in a very specific social group, involves lots of externalities. And the  literature on how more social capital aids the building up of quality neighborhoods and communities is also voluminous.  It is also very much in the literature that this sort of social capital is accumulated, if you will, more by people staying where they are longer so  that they can establish these local networks and build up these groups, as well as  the trust involved in doing so.

I would note, that while we expect the high flying movers to have all  this productive human capital, there is also a benefit to firms of having people who stay with them, accumulating social capital within the firm, which in turn can enhance the human capital of those there, again given the externalities involved.  Indeed, this sort of view was part of what lay behind the old Japanese management practices, with lifetime employment in a firm a common practice, with this involving employees moving around from one type of job in the firm to another.  They gained much firm-specific human capital, rather than profession-specific human capital.  This is where we see this conflict between narrow human capital and social capital coming out.  It is true that lifetime employment in Japan has been declining, but the days when this was practiced was also the period when the Japanese economy performed most spectacularly.  There are clearly gains to firms and to society of having at least some people stay put where they are, although hopefully changing specifically what they are doing where they stay put.

I note a possible exception to all this that Tyler raises in his debate with Noah Smith.  He brings up one of  his favorite pet peeves to punch, the supposedly lazy, or now complacent, millennial without a job who sits at his (or occasionally her) parent's home playing video games.  I  must admit that such people are not going to be generating much social capital or go out and work in community organizations or civic groups probably very much.  However, it may be that this is somewhat of a caricature, and in any case, I would say that such people are more likely to be afraid than complacent, although I cannot say that for sure.

In any case, my argument here is not about unemployed video  game players, but about those who have jobs, but stay with them and in their communities.  They may contribute more and commit more to those communities and their social and economic development than do those high human capital people who are constantly moving from one job and place to another.

Barkley Rosser


Peter Dorman said...

Barkley, I think the human/social capital nexus/tension is more complicated than even your reasonable ruminations allow. The big problem, as I see it, is that economists for some reason want to think of human capital as inhering in a worker as some sort of measurable entity. I regard HK as interacting with how workers are utilized on the job. This is not the same as the general/firm specific distinction we all know and love. You could regard that as two forms of HK, each of which is still an entity the worker carries around with her. I'm referring to the notion that the productivity of HK, and therefore the measurement of its quantity, is a joint product of what the worker brings to the firm and the firm's utilization of the worker. This is a mainstream idea in strategic HR theory, but I don't know of a single economic model that represents it. (I'd love to be pointed to the objects of my ignorance.) This is something I'm pursuing in my own work.

The relevance to the fear/complacency dispute is that acquisition and activation of HK are not monolithically related to workers' horizontal mobility, precisely because of that "activation" element. If incremental learning is valued, and if work is organized to promote it, greater HK is associated with less mobility, as in the primary sectors in Japan in Germany. If not, and if innovation is primarily incorporated in startups rather than ongoing enterprises, then, yes, mobility fosters acquisition of HK and vice versa.

Jerry Brown said...

I think you make excellent points in this article Professor. And in your previous post on Cowen's book which was short, sweet, and dead on accurate. I haven't figured out what point Tyler Cowan is really trying to make. Is it that people are so happy now with the way things are that we shouldn't expect or demand further improvement? We just have to make people more unhappy first if we want to change things?

I haven't bought his book and am not going to. It just seems he is advocating lowering our expectations from what I have read about it. We have reached our limit because so many people just have so much they won't try for more. I guess we should be complacent if he is correct, I just don't think he is. said...


I knew you were going to weigh in on my remark, and I agree fully with your emendations and reservations. The matter is much more complicated than I made it out to be, even as I obviously thought that bringing these ideas up might help with certain aspects of this debate. But I am especially aware of the conceptual and empirical issues with HK, which I said less about than I did about the problems with SK.


Thanks. I am less bothered by Tyler making his point and then sticking to it, although it really does have this sort of "blame the victim" element to it. But he seems to be beginning to recognize that a lot of what he has pointed out really may be more due to fear, and reasonable fear, than complacency, even as he does not want to give it up fully. What bothers me more is the reception the book has received, with Noah Smith being one of the first to really challenge him more seriously on it publicly. Most of the commentary has been slavish and pretty ignorant, if not outright dumb, praise. said...

BTW, Tyler has reportedly said that he is "part of the problem" because he is among the complacent (and he has been at the same job in the same place for quite a long time). So, he may just be projecting himself onto others, even though he is clearly a lot better off than most.

Peter T said...

One area where the value of social stability is very evident is the environment. Where people are allowed to develop a close, permanent relationship with their natural environment they will settle (eventually) on institutional forms that tend to maintain that environment (good examples are the network of Venetian administrative posts that looked after the lagoons, or medieval commons management through manor courts).

In this area, too much mobility destroys capital.

Eubulides said...

The very idea of human capital reminds me of phlogiston and all the theorization invested in that term......