Human Capital vs Social Capital

Sitting on a podcast with Dartmouth Professor Bruce Sacerdote, I was surprised to hear about the differences of social and human capital when my partner asked such a question. To my, not that economically advanced, mind it was interesting. The concepts, in my opinion, meant the same. However, it was false.

The explanation was pretty simple. Human capital is you for you, while social capital is you for everyone. Human capital is you investing in yourself (knowledge and skills). Social capital is the external resource derived from relationships and networks with others (trust and shared information).

To put it short, human capital is an individual “knowing how”, and social capital is a collective “knowing whom”.

A statistics course is human capital. A professor who later recommends you as “statistical guy” is social capital.

Think of human capital as the visible “work horsepower” you carry with you (fluent Python or Stata for econometrics, a portfolio of clean analyses and codes, certification in project management, sharp writing and public speaking skills, a second language you can negotiate in, even a repeatable playbook for running events on time and under budget).

Social capital is the trust and access that makes that horsepower matter in the world (professors who will vouch for you, alumni who forward your memo to the right lab, a WhatsApp group that shares datasets, a mentor who edits your pitch, coauthors who invite you onto a paper, sponsors who open doors because you delivered last time, and a reputation for fast, reliable follow-through that turns one introduction into three. In a nutshell, skills get you credible, whereas relationships get you consequential.

These concepts show up across different fields of economics (development economics, economics of education, and labor economics).

That talk, it really made me think. It was a steppingstone for me. To study unexplored (for me) and share it with others.

P.S: That talk was extremely interesting and insightful. Here is the link: https://youtu.be/5XkbJFHcRwY?si=UTnacE-K8jqKsQOa