1. I am grateful to the participants in the workshop “Sustainable Development with a Dynamic Economy” at the DSE forum in Berlin July 2001 and to Gert Tinggaard Svendsen. 2. This section and the next is a brief summary of Paldam (2000), which contains the key references. -1- Århus, 18/7-2001 Social capital and sustainability Martin Paldam 1) Professor of economics, dr oecon Aarhus University, 8000 Aarhus C, Denmark In the last few years much new research has taken place in the “soft” areas of development related to the large differences between the “civic society” of countries. The field is still full of wooly concepts and ideas. However, it increasingly looks as if the underlying concept of social capital can be developed into something well understood and empirically applicable. Several new findings suggest that this may help to solve some of the main development puzzles. Broadly speaking social capital is the ability of people to organize themselves to solve local problems. Many problems of sustainability are common pool problems. They may be solved by either public steering or by the affected people organizing a solution themselves. The condition for the latter is that people are aware of the problem and have enough social capital. The following discusses the main definitions of social capital, the problems of measurement, and lists some of the empirical results reached. The last section will deal with the policy problem: can social capital be changed? 1. Definitions and the two dreams Social capital is the word that is currently applied to a whole spectrum of closely related concepts, some of which are old. 2) The concepts belong to three main types as listed in Table 1. Table 1. The three families of social capital definitions sc1 Trust. It can be divided into (a) generalized trust and (b) special trust, such as (b1) trust in the law enforcement system, (b2) trust in the political and administrative system and (b3) local trust sc2 Cooperative ability. Peoples ability to work together sc3 Network. The density of voluntary networks