by Barkley Rosser (originally published at Econospeak)
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.