Community

Part III of Social Economics concludes with community. In every economic system, the choices individuals make are influenced in myriad ways by the relationships they have with others, their community. Community creates the culture in which economic activity takes place, setting expectations and enforcing norms of acceptable behavior. Community, in the form of social capital, provides information about jobs and other opportunities and promotes the trust that is so important in economic (and social) exchanges. Community provides restraint on self-interest, allowing individuals to work toward common goals (in providing public goods, for example). High levels of social capital lead to economic growth, stimulate financial markets, and lower loan default risk and hence lower interest rates. Individuals with high social capital obtain more education and earn higher incomes. The influence of peers is especially prominent in economic research. Groups can have both desirable (greater productivity, faster knowledge dispersion) as well as undesirable outcomes (exclusion of outside groups, slower transmission of new ideas). To the extent that desirable community aspects can be encouraged, and the less desirable outcomes discouraged, economic and social outcomes can improve. Unfortunately, this valuable resource is declining, with considerable implications for social and economic health.