ABSTRACT
This chapter discusses the claim that relationships matter a lot. It suggests that socio-emotional goods (SEGs) are critical. An important consideration and one of the strongest arguments for the study of social capital is that both physical goods and SEGs are interdependent: it is almost impossible to separate the two. The chapter describes the neoclassical model by introducing relationships using social capital coefficients to represent the motives. Empirical results generated from survey data provided preliminary support for the hypothesis that relationships alter resource-allocation decisions. Most of the world's economic policies are designed from the perspective that economic agents act independently and selfishly. Beginning with this assumption leads to the view that people can be motivated to alter activities that may impose costs on others only by threat of litigation or by income incentives. Social capital theory suggests that people may respond to other motives.
