In economics, why do people focus on the individual rather than groups of individuals as decision-makers? Wouldn't considering actions decided by a group of individuals reduce the chance of socially nonoptimal outcomes?
Many fields of economics focus on collective decision making. For example public choice theory is almost solely focused on collective decision making as opposed to individual one.
Many areas of economics focus on individual decision making because that’s where actually decisions are made in real life. When you go to the store buy shirt you go there as an individual not as some kind of collective or hive mind. This holds for many economic interactions as well.
Furthermore, collective decisions are not more socially optimal then individual ones. For example, as Arrow impossibility theorem suggests, collective decisions where there are more then 2 options will never be optimal from social welfare perspective (at least in a democracy where there is no benevolent dictator).
However, the Arrow impossibility theorem is derived in idealized conditions. In real life there are areas and cases where collective action is preferable, but as a general rule it’s not possible to say that collective action is more likely to yield socially optimal outcomes.