Gert Tinggaard Svendsen

An essay on social capital: looking for the fire behind the smoke

Abstract Social capital is defined as the density of trust. It is related to production by a key hypothesis: social capital determines how easily people work together. An easy-to-use proxy (Putnams Instrument) is the density of voluntary organizations. Social capital might be a new production factor to be added to human and physical capital, or it might enter as a reduction in transaction or monitoring costs. Direct and indirect ways to measure social capital are discussed. The critical question is what outsiders can do to change social capital. That is, can self-enforcement replace third party-enforcement? We consider how much harm totalitarian regimes do to social capital when they expand their scope of area of control.

Industry lobbying and the political economy of GHG trade in the European Union

The European Union (EU) has committed itself to meet an 8% greenhouse gas (GHG) reduction target level following the Kyoto agreement. In September 2003 the EU member states has agreed on the Directive for establishing a scheme for GHG emission allowance trading within the European Union. This directive is the outcome of a policy process started by the EU Commission and its Green Paper from March 2000. The main industrial stakeholders all had the opportunity to comment on the Green Paper and from their positions we will analyse how far they are winners or losers compared to the final directive proposal. Comparing the initial Green Paper proposal (before lobbyism) to the final directive (after lobbyism) gave us a unique possibility for measuring the effect of lobbyism. Here, we find that the dominant interest groups indeed influenced the final design of an EU GHG market. This industrial rent-seeking most prominently leads to a grandfathered permit allocation rule like the one found in the US tradeable permit systems.

Bridge Over Troubled Water? Migration and Social Capital

The problem of integrating non-Western immigrants into Western welfare states is the focus of this paper. To address this issue, we suggest a social capital approach in which we apply the conceptual pair of bridging social capital (BR), which connects an individual to the broader social structure, and bonding social capital (BO), which closely binds an individual to his or her narrow social group. By this we hope to grasp both the sunny and the more shadowy side of network cooperation and trust in relation to the integration of immigrants. Our data, on non-Western immigrants in Denmark, show a positive relationship between the levels of bridging and bonding capital, suggesting that bonding social capital in the immigrant group does not seem to impede the establishment of the bridging social capital needed for integration.

Building and destroying social capital: The case of cooperative movements in Denmark and Poland

Social capital, measured as the level of trustamong people, may be regarded as a newproduction factor alongside the traditionalones of human and physical capital. Withappropriate levels of social capital,monitoring and transaction costs can be savedand thus economic growth stimulated. Vialinking social capital to rural development andcomparing the cases of agricultural cooperativemovements in Denmark and Poland, this paperidentifies possible roots of building socialcapital and suggests that social capital wasbuilt through a lengthy process in bothcountries during the 19th century. However,the comparison of the present level of socialcapital indicates that the level of socialcapital is significantly higher in Denmark thanin Poland. The paper concludes that the reasonfor this difference is the fact that theoriginal accumulation of social capital inPoland was destroyed by the communist regime.

On the wealth of nations: Bourdieuconomics and social capital

Why are some countries richer than others? We suggest in the line of political economy theory that traditional production factors cannot explain the observed differences. Rather, differences in the quality of formal institutions are crucial to economic wealth. However, this type of political economy theory accentuating the role of formal institutions cannot stand on its own. This implies a socio-economic approach in the study where we supplement the formal institutional thesis with Bourdieu’s idea of material and non-material forms of capital. Such new socio-economics – which might be termed a “Bourdieuconomics” – implies the usage of a capital theory that, methodologically, operates with material and non-material forms of capital at the same level. Here, we stress the particular importance of a non-material form of capital, namely social capital, which facilitates informal human exchange, thereby “lubricating” civic society and the voluntary provision of collective goods such as trust and predictable behavior. In this way, social capital reduces transaction costs in society, thereby enhancing economic growth and the creation of differences in the wealth of nations. Future research should therefore be directed towards analyses of a new and formerly disregarded production factor, socialcapital, within a new field of socio-economics, namely “Bourdieuconomics.”

Measuring Social Capital : The Danish Co-operative Dairy Movement

What are the roots of social capital and how can it be measured and built? Social capital is considered as a new production factor that must be added to the conventional concepts of human and physical capital. Social capital is productive because it increases the level of trust in a society and allows more transactions to take place without third-party enforcement. Theory and lessons from empirical evidence lead to the general recommendation that any loss in social capital must be deducted from the economic gain following market forces. For example, the voluntary organization of small-sized groups in the Danish Co-operative Dairy Movement was eliminated due to economies of scale. It may be so that an alternative way of production, taking social capital into ac-count, could have increased economic growth further.

U.S. Interest Groups Prefer Emission Trading: A New Perspective

If there is to be environmental regulation, what kind of regulation would the main interest groups then prefer? This political distortion must be taken into account when designing future environmental regulation such as CO2 regulation. The three main interest groups in the U.S. (private business, environmentalist groups and the electricity sector) prefer a grandfathered permit market. Business is attracted by this solution because free initial distribution of permits both favours existing sources financially and, furthermore, creates a barrier to entry for new firms. Environmentalist groups have changed attitudes and promote the idea too as a way of negotiating higher target reduction levels with industry to maintain voluntary contributions from their members. Finally, electric utilities prefer a grandfathered permit market, and this step towards less planned economy may be explained by the rise of competition in the U.S. electricity sector. Therefore, it is suggested that a grandfathered permit market is a more effective policy than a tax in relation to organized interests such as industry, electric utilities and environmental organizations. In perspective, the grandfathered permit market may be mixed with the use of taxes. In the case of CO2 regulation, for example, taxes may be applied to badly organized polluters, such as households and the transport sector, because their lobbying power is weak.If there is to be environmental regulation, what kind of regulation would the main interest groups then prefer? This political distortion must be taken into account when designing future environmental regulation such as CO2 regulation. The three main interest groups in the U.S. (private business, environmentalist groups and the electricity sector) prefer a grandfathered permit market. Business is attracted by this solution because free initial distribution of permits both favours existing sources financially and, furthermore, creates a barrier to entry for new firms. Environmentalist groups have changed attitudes and promote the idea too as a way of negotiating higher target reduction levels with industry to maintain voluntary contributions from their members. Finally, electric utilities prefer a grandfathered permit market, and this step towards less planned economy may be explained by the rise of competition in the U.S. electricity sector. Therefore, it is suggested that a grandfathered permit market is a more effective policy than a tax in relation to organized interests such as industry, electric utilities and environmental organizations. In perspective, the grandfathered permit market may be mixed with the use of taxes. In the case of CO2 regulation, for example, taxes may be applied to badly organized polluters, such as households and the transport sector, because their lobbying power is weak. Copyright 1999 by Kluwer Academic Publishers

Consumers, industrialists and the political economy of green taxation: CO2 taxation in OECD

Abstract Economists have traditionally suggested that politicians should simply impose a uniform tax on harmful emissions, as the first-best solution prescribes. However, a detailed analysis of the actual design of green taxes in the OECD reveals that they are differentiated and far from this first-best optimal design. Public choice theory suggests that an important reason that industry as a group, in contrast to households, is capable of lobbying against green taxation. The paper presents empirical findings on CO2 taxation within the OECD countries, which confirm this theoretical prediction. Taxes are not uniform, and households pay a tax rate which is six times higher than that paid by the industry on average. Even when tax revenue is fully refunded to industry, the potential losers (energy-intensive firms) will lobby harder against it than the potential winners (labor-intensive firms) due to small-group advantages. The Norwegian case confirms these arguments. Finally, it is suggested that a CO2 tax may, perhaps, successfully be applied to households, because they tend to be badly organized. As such, a mix of green taxes (in relation to non-organized interests) and grandfathered permit markets (in relation to organized interests) should be considered in the search for cost-effective and politically feasible instruments.

How to design greenhouse gas trading in the EU

Summary: A new and remarkable Green Paper about how to trade Greenhouse gases (GHG) in the EU has recently been published by the Commission of the European Union. This to achieve the stated 8% reduction target level. The Green Paper raises ten questions about how greenhouse gas permit trading should be designed in the EU before year 2005. These ten questions can be compressed into four main issues, namely target group, allocation of emission allowances, how to mix emission trading with other instruments and fourth enforcement. In the literature, there is a strong need to guide decision-makers and stimulate academic debates concerning the actual design of a simple and workable GHG market model for the EU. This model must take both economic, administrative and political concerns into account so that it is feasible in practice. Based on our findings, we therefore develop a policy recommendation concerning the future design of GHG permit trading in the EU.

How should greenhouse gas permits be allocated in the EU

The European Union (EU) Commission has adopted a Green Paper to prepare the introduction of greenhouse gas (GHG) emissions trading as a potential tool for climate change policy within the EU. When similar action was undertaken in the US Acid Rain Program in the beginning of the 1990s, the most controversial feature was that of initial allocation of permits. However, in the EU context, the political and economic implications have not been discussed in detail yet. Therefore, our contribution is to focus on a politically feasible allocation method by considering how these GHG permits should be allocated at both the national and at the power plant level. Our policy recommendation is twofold. First, a proportional rollback of the emissions defined by the Burden Sharing Agreement is a suitable starting point concerning allocation at the national level. Second, a common grandfathered distribution principle, such as an allocation of permits to individual power plants based on a percentage reduction of the current size of emissions, is to be preferred over an allocation principle based on past emissions.