Abstract
How important is social capital for a market economy and what effect does government intervention have on social capital? By looking at how the market is embedded within an institutional framework that depends on certain norms, government intervention can distort certain signals and destroy the social capital necessary for a well-functioning market economy by channeling resources into unproductive anti-market activity. The following essay looks at the various definitions of social capital and then discusses how government intervention distorts social capital, networks, and norms, as well as provides a theory of when government intervention can lead to a pushback into reaffirming previous social norms instead of government leading to more and more government intervention.
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