Why social connectivity matters

It is a great pleasure to be giving the first of the Lord Mayor’s lectures for the new year. The theme of the mayoralty is ‘Connect To Prosper’. That chimes perfectly with the theme of my lecture - social capital and connectivity.

Unlike other forms of capital, social capital has no singular definition or simple means of statistical measurement. But it is generally taken to capture the strength of trust and relationships, and the degree of community and connectivity, in a group. That group might be small (a family), medium-sized (a community or town) or large (a country or continent).

So defined, I am sure the importance of social capital is immediately recognisable. It is not too much of an exaggeration to say the success of the City of London was built as much on its rich endowment of social capital as its physical, human and financial capital. The Lord Mayor calls the City “the world’s coffee house”. The City’s “bonds” have always been as much relational as financial.

The same is true of my own institution, the Royal Society of Arts (RSA). The RSA first established itself, also as a coffee house, in the 18th century. Its secret sauce was, and remains, social connections between individuals from different professions, sectors and disciplines. That created a crucible of creativity that has fired social innovation at the RSA for 270 years – the same crucible that has fired financial innovation in the City for a millennium.

Social capital in the shadows

Yet despite this rich history, social capital and connectivity have been relatively neglected when it comes to understanding our economies and societies and nurturing their success. The same relative neglect has afflicted public policy initiatives aimed at nurturing social capital. Our models and policy menus have too often been asocial, underemphasising the role social networks play in shaping societal outcomes, for better, or for worse.

Encouragingly, things are now changing. New empirical evidence is emerging putting social capital and connectivity centre-stage in explaining economic and societal success. In this lecture, I will review some of that emerging evidence. This evidence provides the building blocks of a pro-social view of the economy, society and the policies needed to nurture both.

I will conclude with some reflections on how that evidence might shape future policy, including at the RSA, to unlock opportunities for individuals, communities and societies. A pro-social policy agenda offers a potentially low-cost, high-impact, means of enabling the mass flourishing of our economies and democracies. This is a golden thread now running through all of the RSA’s Design for Life programme of change.

This agenda not only represents an exciting new avenue for understanding social systems and shaping policy interventions. It also represents a new flavour of capitalism – what you might call “social capitalism”. This is a system in which social capital is given prominence, perhaps primacy, in shaping policy and nurturing societal success.

A pro-social world

To set the scene, let me start with a little economic theory. Most of classical economics is built on the concept of rational economic man – homo economicus. That means decisions are made in ways which maximise an individual’s own wellbeing or utility, rather than that of others. In other words, homo economicus is asocial.

One of the attractions of this approach is that, under certain conditions, it generates a remarkable outcome. Even if every individual sets about to maximise their own individual wellbeing, the collective outcome is still the best possible one for society as a whole. Economists give this proposition a grand title – the first fundamental welfare theorem.

In this setting, there is no distinction between individual and collective wellbeing – they are one and the same. Nor are there any differences between outcomes in the economy and in wider society - the two are synonymous Essentially, relationships - social capital and connectivity – play no role. In this world, there is no such thing as society, just the decisions of individuals.

While it is easy to dismiss this model as simplistic, its very simplicity has been remarkably powerful in shaping policies over the past half-century. Indeed, it continues to provide the benchmark for some liberal thinking today. It is the unfiltered laissez-faire of Adam Smith in the Wealth of Nations.

One problem with this framework is that it affords little role to the very things that make us human and, as such, is sharply inconsistent with real-world human behaviour. Studies of actual communities (by sociologists and anthropologists) as well as in the lab (by psychologists and behavioural economists) show that humans exhibit strongly pro-social attributes. These include reciprocity and mutuality, kindness and fairness.

Society over individual

This seemingly small tweak completely reshapes theory. The first fundamental welfare theory shatters on contact with humanity. What is best for the individual is no longer necessarily best for wider society. The economy and wider society are no longer synonyms. Social connectivity and capital now play a key role in shaping individual and collective outcomes.

This new model of economic behaviour is, in one sense, not new at all – even among devotees of Adam Smith. The Adam Smith of 1759 in his Theory of Moral Sentiments (rather than of 1776 in his Wealth of Nations) was a model of capitalism with pro-social behaviour and a social conscience. That is why for many (including me) it is believed to be his better book.

Yet models with pro-social features remain outside the mainstream. Social capital rarely plays a role in models of growth and progress, whether at the individual, community or national level. Nor is it central to policy design. That is surprising given the body of evidence to have emerged over recent years pointing to its centrality to each.

The pro-social evidence

That evidence points, increasingly compellingly, to the importance of social capital and connectivity to the fortunes of individuals, communities and countries – the micro, meso and macro. Indeed, some of this evidence gives social capital a central position in shaping success at each level.

Starting with individuals, consider two remarkable studies from the US, one longitudinal, the other cross-sectional. The first is a Harvard study of adult cohorts dating right back to the 1930s, tracking their behaviours, characteristics and outcomes over time. This gives a unique insight into what really matters for life prospects and life chances.

This research finds that human connectivity – the quantity but especially the quality of our relationships – does a good job of explaining the quality and length of our lives than any other factor. When it comes to lifespans and life chances, nothing seems to matter more than the trusting relationships we nurture - who we know (social capital), not what we own (physical capital) or what we know (human capital).

The second study by Raj Chetty and co-authors reaches a complementary conclusion. It looks at patterns of social mobility at a highly granular level in the US. These social mobility patterns are strikingly different between, and within, US states. Chetty’s so-called ‘opportunity atlas’ is highly variegated for reasons that are, on the face of it, difficult to understand.

Spatial patterns of social mobility

Chetty’s most recent research seeks to explain these spatial patterns of social mobility. Specifically, he uses billions of observations from Facebook to construct measures of social connectivity between individuals. Given the richness of the data, this enables us to identify not only who is in our social network but why (for example, school, sports, work or church).

The fascinating finding from this research is that metrics of social connectivity do a strikingly good job of explaining patterns of social mobility - indeed, a better job than other metrics. As with the longitudinal data, who you know matters more than what you know when it comes to generational progress. The key to social mobility is social connectivity and capital.

The effects in Chetty’s study are large, especially for groups with weak pre-existing social ties. For example, people from lower socio-economic groups can, by connecting with people from higher socio-economic groups, boost their lifetime incomes by 20% according to Chetty’s estimates. It is very hard to find policy interventions with such high social returns.

At the RSA, working alongside the Behavioural Insights Team and Meta, we are undertaking the same research on UK data. We aim to use the results not only to understand the spatial determinants of UK social mobility but also to use these insights in the design of all of our Design for Life programmes.

Taken together this research – drawing on billions of observations across millions of individuals – points in a strong and singular direction. Social capital and connectivity hold a, if not the key to individual progress and social mobility, to lifespans and to life chances, especially among the least advantaged and least well connected in society.

Social mobility: a sticky subject

Despite repeated attempts, often at high cost, social mobility has been strikingly sticky in the US and UK. Indeed, there some is evidence of it having been in retreat. Chetty’s research provides a tantalising glimpse into how those patterns might be reversed and the life prospects of many disadvantaged, disconnected people unlocked.

The benefits from nurturing bridging capital (social connectivity) also appear for bonding capital (the common values exhibited by communities). Here the links appear to be strongest with measures of life satisfaction rather than social mobility. The stronger our common bonds, the happier we are.

Turning to communities, almost a quarter of a century ago Robert Putnam charted the collapse of social capital across US communities in “Bowling Alone”. Subsequent research has backed up these stories, finding that communities with weaker social ties are blighted by low incomes and life expectancies, high crime and anti-social behaviour.

In surveys, people in poorer places rank social factors (lack of security and safety, community and relationships) more highly than economic factors (jobs, education and transport). There appears to be a Maslow-type hierarchy of needs. This helps explain why nurturing social capital is essential in disadvantaged communities, just as it is among disadvantaged people.

Finally, at the macro level, there is now a body of evidence linking measures of social trust to macroeconomic outcomes, such as GDP. There is a strong and link between social trust and economic development and growth, looking across large samples of countries. Indeed, trust does as good a job of explaining cross-country patterns of economic growth as any other indicator.

Social trust as an economic boost

The effects also appear to be quantitatively large. Typical studies find that a 10% rise in measures of social trust might boost relative economic performance, such as GDP per head, by around 1.3-1.5%. If the UK had Swedish levels of trust, it is estimated that incomes would be at least 6% larger than today. In a low-growth economy, that is a sizable prize.

There are a number of mechanisms which might explain why trust is good for growth. Institutional quality, with fewer so-called “extractive” institutions and more that are “inclusive”, would be one mechanism. This link was explored by Daron Acemoglu and James Robinson in their book Why Nations Fail. Another would be the lower transaction costs and uncertainty when doing business in high-trust economies, boosting innovation and productivity.

Pro-social behaviour is not confined to humans. There is strong evidence of pro-social behaviour in the animal kingdom and among flora as well as fauna. For example, there is strong evidence of trees behaving in a pro-social way through their root connections, exhibiting attributes such as reciprocity, mutuality and fairness. This has been dubbed the “wood wide web”.

Pro-social behaviour is the rule among living creatures. Other than among that strange and distinct species calling themselves “economists”, most living things are pro-social by design. That is almost certainly an evolutionary artefact, with strongly pro-social communities delivering better outcomes over time, encouraging their future growth in a Darwinian survival of the kindest.

A pro-social policy agenda

On many metrics, social capital appears to have been significantly depleted over recent years. Many more individuals and communities appear to be Bowling Alone in what Vivek Murphy, US Surgeon General, has called an epidemic in loneliness. For those worst affected, we have seen rising suicide rates – the “deaths of despair” discussed by Anne Case and Angus Deaton.

Social capital appears to have been depleted as comprehensively and systematically as any of the other capitals. Our hyper-connected world has, perversely, left many more people and places disconnected from the mains. So what might be done, policy-wise, to replenish social capital and unlock the potential of people and places?

Given the richness of the evidence, I think there is real potential to put in place imaginative initiatives that re-wire social networks to boost the fortunes of individuals, communities and nations. Let me end by offering some illustrative suggestions on policy options that the RSA is pursuing as part of our Design for Life programme.

1. Measuring social capital

One of the criticisms made of social capital as a concept is that it cannot be easily, or at least objectively, measured. This is no longer the case. The ONS now regularly publish a range of statistical measures of social capital. These measures might benefit from refinement and further statistical analysis but provide a sound starting point.

Yet these measures have yet to find their way into mainstream policy evaluation – for example, HM Treasury’s Green Book which provides the framework for policy evaluation. Given the strong links between social capital and economic, social and health outcomes, this gap risks potentially effective policy measures being ignored or rejected.

2. Working from home

There is an ongoing debate about the productivity costs and benefits of working from home. This debate has tended to focus on the near-term productivity benefits of remote working and less on the potential longer-term costs.

One relatively unexplored cost is the impact of home-working on relationship-building in organisations. Digital infrastructure is fantastic for meetings, but terrible for meeting. It is the latter that builds social capital. Because we know relationships are key to individual wellbeing and progression, this dimension of the working-from-home debate merits far greater attention.

3. 21st Century human skills

Most people accept that the decades ahead will see a transformation in both the jobs people undertake and the skills that they will need to undertake them. It is also widely accepted that AI and other technologies will displace a range of human tasks, especially routine and repeatable ones. Contrary to some perceptions, this will enhance, not detract, from the importance of humans and their distinctive skills. Empathy, negotiation, relationship-building and communication skills will come at an even greater premium.

This underscores the importance of reorientating our education and learning systems to give social skills and social connections a position of greater priority and prominence than at present. This is important both as a way of making the best of the present, but also as an insurance policy against technological obsolescence in the future.

4. Social mobility and social connections

The most ambitious policy agenda would involve making active attempts to rewire social networks to enhance individual life chances and wellbeing - libertarian paternalism. Guided by research, it would be possible to put in place interventions at different points in peoples’ lifecycles to reshape their social connections – for example, in school classrooms, on sports fields, in workplaces, in community meeting spaces, and on social media.

These are the sorts of interventions we hope to put in place as part of the RSA’s Design for Life programme. This would represent a new and relatively low-cost/high-impact means of unlocking opportunity in people and places, particularly those disadvantaged by their history, geography or both.

5. Investing in social infrastructure

Investment in physical infrastructure (such as transport) and, to a lesser extent, digital infrastructure (such as broadband) sits at the centre of public policy debates. By comparison, debates around social infrastructure – green spaces, community centres, youth clubs, sports facilities and libraries that support community belonging, connectivity and capital – have been poor relations.
Social infrastructure has, as a result, often borne the brunt of funding cuts, in particular by local authorities. In comparative terms, spending on social infrastructure is tiny. That prioritisation needs to change if we are to harness the high social returns that social infrastructure investment delivers.

Conclusion

Almost all living things are strongly pro-social. They thrive on social connections and collective collaboration, with mutuality and fairness innate and embedded. Over the millennia, there is no more tried and tested recipe for mass flourishing.

But just because pro-social behaviour is innate does not mean it should go untended. The slump in social capital seen recently is testament to the perils of doing so. With social capital depleted, there is so much more that could be done to unlock the potential of people and places by actively investing in social capital. I have suggested some examples of how that might be done.

These are approaches the City of London and the RSA have long extolled, the creative coffee houses of their day, today and tomorrow. One of my hopes for the new year is that we give momentum to initiatives that promote social capital. That is the essence of the RSA’s Design for Life programme. If ever there were a time for social capitalism to rise and shine, it is now.