Communities, Social Capital and Public Policy: Literature Review

Melbourne Institute Working Paper No. 26/03

Date: 2002


David Johnson
Bruce Headey
Ben Jensen


In this paper we explore the meaning and relevance of community and social capital, working mainly in economics though drawing on other disciplines. Economic studies of community have focussed in one of two main areas, neighbourhood studies and regional economics. We discuss the contributions of both to understanding about communities. In public discourse the concept of social capital has emerged as a resonant measure of community strength. Our review suggests that is a slippery concept with ambivalent and sometimes ambiguous interpretation. Nevertheless it has been useful in suggesting guidelines for development of public policy in relation to community. The relationship between social capital and the family, education, ethnicity, democracy, health, happiness, crime and economic performance are considered in this working paper. International comparative data is used to evaluate social capital in Australia. To clarify the sometimes cloudy meaning, our review suggest four principles for measuring social capital; distinguish between structure and content, specify the arena or area of activity to which a measure applies, specify the level of aggregation at which the measure applies and assess the net benefit of social capital empirically. We explored policies for strengthening community in Australia and the UK. Studies of both local area initiatives and proposals at the national level are considered. Issues of governance are discussed in relation to the application of policy to communities and the review concludes with some suggestions for further research.