Community and Economics
Abstract
Community has a problematic relationship to economics. In general, contemporary political economics holds that groups have strongly negative effects on economic efficiency and growth, because groups bind individuals into situations where they can no longer realize their preferences, exit freely, and find effective representation for their interests. Communities are, at best, necessary evils when there are egregious market failures. There are other strands of economic research, however, that can be drawn on to provide micro-foundations for the welfare-enhancing properties of communities. With these in hand, we can draw a more complete picture of the potential welfare effects of communities, revealing how geographical processes — increasing factor mobility and global market integration — strongly affect the shape and functioning of communities and hence alter the balance of their positive and negative economic welfare effects.