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You're presuming a perfect market where the most economically efficient organisation will win. There is no guarantee that our current economy is like that.

• barry-cotter 12y ago
  ADBOC. This is like the efficient market hypothesis, the strong version is wrong and the weak version is so weak as to be almost tautological. In a perfect market the most economically efficient organisation would win, end of story. What we've got isn't that but it's an approximation thereof. The closer it gets to fulfilling all the conditions the more likely it is that the outcome is economically efficient. The only economy I'm aware of that had a lot of employee owned cooperatives was Yugoslavia. It worked better than Soviet bloc communism as far as resource allocation and living standards went but not as well as capitalism. Co-ops don't expand as much as privately or publicly held firms because they maximise something approximating profit per worker whereas normal firms maximise straight profits. I think I picked up that argument from Paul Krugman. It's been a long time since I read the argument so I may be misremembering but he used Harvard and the UC systems as examples. Harvard doesn't expand its student body, this maximises faculty utility, the UC system does, this maximises student utility. The article even mentions that worker's co-ops have higher profitability than normal firms.
  • michaelochurch 12y ago
    Co-ops don't expand as much as privately or publicly held firms because they maximise something approximating profit per worker whereas normal firms maximise straight profits. I think I picked up that argument from Paul Krugman. r- and K-selection. Companies like Google and Microsoft, which grew large at the cost of culture, are r-selective. Valve and Github, which grow more slowly while maintaining open allocation and cultural health, are K-selective. It seems impossible, in the long run, to be K-selective if you take venture capital. You're now controlled by people with the attention spans of five-year-olds.
• yummyfajitas 12y ago
  What imperfections do you believe exist that prevent efficient coops from taking over? Please be specific.
  • scarmig 12y ago
    Not the comment author and I wouldn't commit to the idea that co-ops are more efficient, but here's a stab: 1) Coops have different governance structures than traditional businesses. Diffused knowledge, institutional practices, and the legal system itself are oriented toward the dominant paradigm. Given a choice between a traditional business and a co-op that is otherwise equally well-situated, if I'm a profit maximizer I'm going to loan capital to the traditional business, since it's more of a known quantity. I've got no idea of the unknown unknowns that go along with getting involved with a co-op. 2) This goes along with the idea that co-ops are inefficient instead of trying to argue they aren't, but the incentives of a co-op are different than a traditional business. A traditional business will attempt to maximize total profit per unit capital (I think); a co-op will try to maximize something closer to total profit per unit labor. The former will succeed in a capital-poor world, while the latter is better for a labor-poor world.