And by almost the same reasoning the level of government
predation D will be monitonically increasing in omega.
Why? Well, because the society is able to
self-accommodate and make it less costly to itself
in the case government redistributes wealth from the society. And
that certainly reduces government's accountability.
That reduces heat, pain, pressure on the government because
government officials are aware that the society will
find means to compensate the negative consequences of the misbehavior.
And, therefore, the amount of diverging of wealth from the society D
is a function that declines in civic culture, and
a function that increases in grassroots social capital.
Therefore, we can conclude that if this society has
considerable stock of grassroots social capital, and
if it's accustomed to picking up where governments left off for making up for
governments lack of performance at the grassroots, then this society
will have lower levels of public services and public goods then otherwise.
So, the input of this second type of social capital, grassroots social capital,
for the quality of governance is negative.
And this table summarizes what we've learned so far.
We have two types of social capital:
one is civic culture and one is grassroots
social capital. And our analysis leads to the following conclusion.
As far as quality of governance is concerned, civic culture has a positive impact
and grassroots social capital has a negative impact.
More importantly, and somewhat less obviously, both types of social capital –
civic culture and grassroots social capital – affects social welfare.
And the question is how they do it?
In the case of civic culture the answer is simple.
The effect is positive and this is pretty obvious if we have a look at this
formula or, perhaps, even better at this one,
the high level of civic culture leads to lower D's and,
as a result, the society is better off.
Government predation is much lower than it would have been otherwise.
However, when it comes to grassroots social capital,
the situation is not obvious because there are two effects:
there is a direct effect at the grassroots and
there is a political effect.
As far as the political effect is concerned, as we saw grassroots social
capital creates disincentives for governments to deliver their services,
and, as a result, government predation increases in size and the society is worse off.
So, the sign of the political effect for social welfare is negative.
Grassroots social capital has also direct effect because it certainly
reduces social losses from C0(D) down to C1(D).
And, therefore, the direct effect of grassroots social capital
is then positive.
And the question is which of these two effects – direct which is positive and
indirect, political which is negative – is stronger?
And the answer that it depends on the stock of civic culture, and
it depends on the stock of civic culture as follows.
If there is a high level of civic culture,
in that case there is none or almost none of government predation, and
in that case grassroots social capital is idled, it's not really required
because the government is doing what it is expected, and, as a result,
there is no need to make up for what the government is not properly done.
And in that case, for high level of civic culture
we could expect that the social payoff to grassroots social capital
is going to be zero.