An Austrian Analysis of Social Capital



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This dissertation consists of three chapters on the importance of entrepreneurs and their socially embedded activities.The first chapter, “Is Social Capital Underproduced?” examines the titular question by asking whether social capital might be better conceived of as a club good than as a public good, as has often been claimed in previous writing on the subject. Furthermore, it argues that even were social capital underprovided, perhaps due to positive externalities associated with the club’s provision of it, there is not much policy can reasonably be expected to accomplish to rectify the problem. The heterogeneity, diachronic change, and cost of social capital represent an insurmountable knowledge problem for policymakers. Instead, as ethnographic evidence from disaster recovery shows, local communities working in a polycentric fashion are more likely to succeed in achieving the goal of efficient and effective social capital production. The second chapter, “Commercial Social Spaces in the Post-Disaster Context” examines the way entrepreneurs can create social spaces, both intentionally and unintentionally, that facilitate social capital formation and use. Evidence from post-disaster social spaces demonstrates the empirical relevance of the phenomenon. One policy implication of this finding is that granting entrepreneurs the freedom and flexibility necessary to create such spaces is important for maximizing their contribution to disaster recovery. The third chapter, “Disaster Challenges and Entrepreneurial Responses” looks at entrepreneurs’ contribution to solving major problems in the post-disaster context. These entrepreneurs may be either profit-motivated or social entrepreneurs, who often use reputation as a guiding signal for their activities. Three major categories of problems communities face after disaster include the pervasive uncertainty and ignorance disasters engender, the massive destruction of wealth disaster wreak, and the politically charged nature of the social environment surrounding disasters. Entrepreneurs navigate all three of these problems and work to both identify problems and implement solutions.