An economic model of social capital and health

This paper presents an economic model to connect with the substantial empirical literature on social capital and health that exists largely outside of economics. Representative papers from that literature are reviewed and these show that disagreements exist on the nature and definition of social capital. The paper presents a new line of reasoning to support the view of social capital as a network of interpersonal bonds to include the bonds of family and close friends, not just the community at large. It then adapts and extends the work of Becker and Murphy on social economics to explain the demand for health goods as well as health bads in the presence of increased social capital. It further develops choice under risk to explain the demand for goods that entail a risk of death, such as cigarettes, illegal drugs, or excessive drinking. Empirical examples, including new statistical analyses are presented to illustrate the derivations.