Studies of economic development and economic history have long been concerned with the relationship between the transparent and supposedly anonymous forces of markets, rules and bureaucracies, on the one hand, and membership in groups, such as local communities, associations, or networks. 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 most, they are seen as archaic factors, leading to nepotism, rentseeking and institutional rigidity. Each position in this theoretical standoff underestimates the contributions of either society or community to economic development. This is because both society and community have potentially positive and negative effects; together, however, they can act as mutual checks and balances on their potentially negative effects, while reinforcing the positive contributions of each of them to economic efficiency.
