Working Paper
Group Behaviour and Development

A very large amount of activity occurs within groups (that is within families, firms, co-operatives, conununities or governments). Yet most economic analysis focuses on market transactions between these agents. The purpose of the study is to analyse within group behaviour. Evidence suggests some groups perform well from the perspective of efficiency, equity and well­ being, while others perform poorly. The study aims to identity the main causes for these different outcomes, developing a preliminary analysis of modes of group behaviour, and influences on them. The study identifies three modes of group behaviour: one which secures members' adherence to the group objectives via power and control, in a hierarchical way; one which operates by the use of financial incentives; and one which operates through co-operation among members to achieve the often shared objectives. It is suggested that external norms, and other conditions in the society in which the group is located, are an important influence on mode of behaviour. A review of some existing empirical literature of behaviour in firms, in local government and health services, and in co-operatives and conununity organizations found a variety of modes of operation and also outcomes within each category. However, groups rarely fall completely into one category or another but frequently combine elements. Co-operative modes of behaviour are often as efficient as the alternatives, because they save on transactions/supervisory costs; but although groups operating in a co­ operative mode are often associated with more equity among their members, and sometimes also have a more equitable impact on the economy, this is not always the case. External conditions-not only prevailing norms, but also the distribution of assets and income-seem to be an important influence on group behaviour, and, in particular, on the equity of within group relationships. These suppositions are being examined further in the research project that is underway.