The paper by Glaeser, Laibson, and Sacerdote explores the economic approach to understanding social capital formation. They argue that to identify the determinants of social capital, it is essential to understand individual investment decisions in social capital. The authors present a model of optimal individual investment in social capital, contrasting it with group-based analyses that focus on institutions, norms, and aggregate outcomes. They define individual social capital as a person's social characteristics, including social skills and network size, which enable market and non-market returns from interactions with others. The model predicts that social capital investment rises with the discount factor, declines with mobility, and is influenced by occupational returns to social skills, homeownership, physical distance, and time preference. The paper also discusses the aggregation process of individual social capital into community-level social capital and tests these predictions using empirical evidence. The findings suggest that individual incentives, not group membership, drive social capital accumulation decisions, highlighting the importance of interpersonal complementarities in social capital formation.The paper by Glaeser, Laibson, and Sacerdote explores the economic approach to understanding social capital formation. They argue that to identify the determinants of social capital, it is essential to understand individual investment decisions in social capital. The authors present a model of optimal individual investment in social capital, contrasting it with group-based analyses that focus on institutions, norms, and aggregate outcomes. They define individual social capital as a person's social characteristics, including social skills and network size, which enable market and non-market returns from interactions with others. The model predicts that social capital investment rises with the discount factor, declines with mobility, and is influenced by occupational returns to social skills, homeownership, physical distance, and time preference. The paper also discusses the aggregation process of individual social capital into community-level social capital and tests these predictions using empirical evidence. The findings suggest that individual incentives, not group membership, drive social capital accumulation decisions, highlighting the importance of interpersonal complementarities in social capital formation.