Social capital and the evolution of risk management: Balancing risk-taking and risk-avoidance in cooperative networks

Joon Hwang, Nurul Alam and Mary K Shenk
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Mary K Shenk: The Pennsylvania State University

No bxt8g_v1, SocArXiv from Center for Open Science

Abstract: Throughout human evolutionary history, individuals have faced two fundamental challenges under uncertainty: deciding whether to take risks and managing risks through cooperation. While both risk-taking and social risk management have been widely studied, less attention has been given to how these two processes are linked—specifically, how risk-taking itself may be shaped by social networks. We test the "social capital buffer" hypothesis, which posits that greater social connectedness promotes risk-taking by buffering against negative outcomes. Analyzing social networks and risk preferences among 140 individuals in rural Bangladesh whose livelihoods range from farming to wage labor and small-scale trade, we identify distinct pathways through which social capital influences risk preference. Highly clustered individuals in financial support networks exhibit greater risk preference, suggesting that clustering facilitates risk-taking by ensuring resource circulation within a tight-knit group. In contrast, individuals with more support-receiving ties in material support networks are more risk-averse, indicating that material support functions as informal social insurance reducing reliance on risky decisions. Finally, reciprocity in material support networks promotes risk-taking only among wealthier individuals, highlighting how individual economic resources interact with social capital to shape risk-taking. These findings reveal that social capital does not uniformly promote or constrain risk-taking but serves distinct adaptive functions based on network structure, economic conditions, and resource types, balancing risk-taking and risk-avoidance to help individuals successfully navigate uncertainty.

Date: 2025-09-27
New Economics Papers: this item is included in nep-evo, nep-net, nep-rmg and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:bxt8g_v1

DOI: 10.31219/osf.io/bxt8g_v1

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