The new elements in the recent interest in 'social capital' are that, first, one can measure the level of trust and cooperation, and compare these levels across communities/ regions/countries, and, second, that one can assess empirically the influence of these measured variables on various micro and macro social phenomena. This paper attempts to analyse the feasibility and the validity of both measuring social capital at the level of the states and identifying its role in explaining the differential performance of states. It identifies three types of problems in the application of this methodology to interstate analysis: finding appropriate measures for social capital; locating alternative indicators valid for interstate analysis; and interpreting the statistical association between social capital and state performance.