Economic Progress, Social Regress?

19 Pages Posted: 11 Dec 2007

See all articles by Amy Farmer

Amy Farmer

University of Arkansas - Department of Economics

Date Written: 2006-07-03


A central issue in the debate regarding the relevance of social capital is whether the decline in social embeddedness that has attended modernization over the last 40 years in the United States is as harmful as Putnam, among others, claim it to be. Critics of Putnam's thesis argue that various arms-length institutions fulfill the roles performed by social capital thereby mitigating the negative impact of its recent decline. We develop a framework that provides insight into when such institutions may be adequate and when they might not. We find that if market (economic) and non-market (social) interactions differ in their payoffs but are interlinked through the modernization of the economy, the optimal level of modernization in market interactions will be higher than that in non-market interactions. Further, market supporting institutions are likely to increase the divergence between economic and social interactions since analogs for market institutions that constrain opportunistic behavior are usually nonexistent in social contexts. In this sense, economic progress may be accompanied by social regress.

Suggested Citation

Farmer, Amy, Economic Progress, Social Regress? (2006-07-03). Journal of Public Economic Theory, Vol. 9, Issue 3, pp. 501-519, June 2007, Available at SSRN: or

Amy Farmer (Contact Author)

University of Arkansas - Department of Economics ( email )

Fayetteville, AR 72701
United States
501-575-6093 (Phone)
501-575-3241 (Fax)

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