Social Capital

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DEFINITION of 'Social Capital'

An economic idea that refers to the connections between individuals and entities that can be economically valuable. Social networks that include people who trust and assist each other can be a powerful asset. These relationships between individuals and firms can lead to a state in which each will think of the other when something needs to be done. Along with economic capital, social capital is a valuable mechanism in economic growth.

BREAKING DOWN 'Social Capital'

For example, if you know someone at a company where you are applying for a job and this connection helps you get the job at the company, you have used social capital. Social capital can also have negative effects. For example, if a social network is used for manipulative or destructive purposes that will affect the economy negatively, such as when a group colludes to fix market prices.

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