The provision of goods and services by community groups: a theoretical approach

Abstract

Both politicians and social scientists are gradually realizing that the dichotomy between the public and the private sectors as exclusive suppliers of goods and services in an economy does not hold. Production of goods and services is not the exclusive domain of this well researched set of institutions; a considerable value of economic activities is organized in non-profit organizations, voluntary associations and also in small grass-root community groups, not to mention the productive elements of household behavior, as for example the various ‘self-service’ activities. All these forms of activities are now regarded as part of a ‘third sector’ in an economy, a sector which deserves careful analysis and observation. Recently, the importance of the ‘third sector’ has been increasing, mainly because of the difficulties in financing public sector deficits and the growing interest in ‘alternative’ lifestyles.

This paper concentrates on a subset of the ‘third sector’. It hypothesizes that also smaller (grass-root) community groups provide a considerable amount of goods and services; a hypothesis that is substantiated by a list of concrete examples. However, the central point of the paper is to demonstrate how much established economic theory can contribute to a theoretical explanation of the behavior of community groups. By analyzing three examples of the traditional approach it is shown that traditional economic theory can at best describe only certain aspects of the subject under discussion; the main elements of a socio-economic theory of community groups remain tasks for future research.