Groups for good or Ill

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Abstract
Groups consist of collections of individuals who act and take decisions together. They are hugely important in economic and social activity, encompassing governments, firms, local organizations and families. Yet much of neo‐classical economics ignores them, focusing on individuals, or treating groups as quasi‐individuals. This paper classifies alternative modes of operation of groups and considers some empirical cases, exploring why some groups help improve incomes and distribution while others are unproductive. It is argued that a trust/reciprocity mode of operation tends to be associated with “good” group behaviour. The mode of operation of particular groups is conditioned by individual motivation and social pressures; these are both dependent on historical circumstances, including the degree of equity within the community and prevalent incentives, constraints and philosophy. A crude market philosophy can encourage individual short‐term maximizing behaviour, undermining good group behaviour. In contrast, where trust and reciprocity prevail in a market context, groups can promote efficiency and equity.

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