The economic value of community capacity building

Marsh K, Knapp M, Dolan P, Venkatachalam M


What is the economic value of community capacity? This is a question that warrants attention for a number of reasons, including: recent government initiatives to promote community capacity, such as the Big Society; a trend toward commissioning based on outcomes; as well as a paucity of evidence with which to answer this question. This review argues that many of the benefits associated with community capacity are compatible with the notion of economic value, and that further research should be undertaken to estimate the economic value of these benefits.

Community capacity is taken to mean the networks and relationships, and the consequent shared norms, trust, habits, and values that enable people to act collectively. This conception of community capacity implies no necessary relationship between community and geography, and is taken to be synonymous with associated phenomena, such as social capital.

The literature identifies a number of benefits associated with community capacity. These include outcomes for individuals such as: improved health and child development; a better functioning economy through the promotion of trust and the dissemination of information; and the promotion of norms that facilitate collective actions that help allocate public goods.

The economics literature has to date paid relatively little attention to the benefits of community capacity. Studies that have focused on the economic value of community capacity have adopted a number of approaches, including:
•estimating the impact of community capacity on economic output;
•valuing the time of volunteers;
•estimating the public sector cost savings associated with community capacity;
•estimating the willingness to pay for health and other outcomes generated by community capacity.

This research provides valuable insight into the economic value generated by community capacity. The economic notion of value is, however, broader than these approaches would suggest. Economic value is commonly misconceived as reflecting market prices. When economists talk about ‘value’ they are referring to the broader notion of ‘utility’. Furthermore, economists have demonstrated that market prices, under certain assumptions, are able to capture the utility generated by certain goods and services, but certainly not all. They have developed a range of valuation techniques to capture values not reflected in market prices, which elicit people’s willingness to pay for non-market outcomes. These have been applied to a wide range of outcomes, such as crime, pollution and health.

View PDF