Society, Community and Economic Development

Studies of economic development and economic history have long been concerned with the relationship between the transparent and supposedly anonymous forces of markets, states and bureaucracies, on the one hand, and the particular local and national forms of social organization in which actors' daily lives are embedded. Economists are quite divided about these latter forces: for some, they are necessary underpinnings for the market, providing trust and social capital which in turn reduce transactions costs and moral hazards and hence promote development; for others, they are seen as archaic, leading to nepotism, rent-seeking and institutional rigidity. Sociology, too, has long debated the respective roles of gesellschaft and gemeinschaft in societal development, and has recently revived this through research on social capital. Indeed, throughout the social sciences, there is a tension between the roles assigned to what we might call the "societal" and the "communitarian" bases of social and economic development. Each position in this theoretical standoff underestimates the contributions of either society or community to economic development. This is because the interaction of society and community define critical incentives for actors in the process of economic development. Society and community act as mutual checks and balances on their potentially negative effects, while allowing the positive contributions of each to the economic efficiency. This analysis leads to a reconsideration of some of the foundations of comparative economics and institutionalism, by placing them in a more realistic sociological framework.