Föllmer, H., Horst, U. and Kirman, A. (2005), ‘Equilibria in Financial Markets With Hetero-geneous Agents: A Probabilistic Perspective’, Journal of Mathematical Economics, Vol. 41, No. 1–2, pp. 123–155.
Grossman, S. J. and Stiglitz, J. E. (1980), ‘On the Impossibility of Informationally Efficient Markets’, American Economic Review, Vol. 70, No. 3, pp. 393–408.
Hildenbrand, W. (1994), Market Demand: Theory and Empirical Evidence, Princeton, NJ: Princeton University Press.
Hommes, C. (2013), Behavioral Rationality and Heterogeneous Expectations in Complex Economic Systems, Cambridge: Cambridge University Press.
Kartik, A., Kirman, A. and Marsili, M. (2013), ‘Epidemics of Rules, Rational Negligence and Market Crashes’, European Journal of Finance, Vol. 19, No. 5, pp. 438–447.
Lucas, R. E. Jr. (2003), ‘Macroeconomic Priorities’, American Economic Review, Vol. 93, No. 1, pp. 1–14.
Mantel, R. (1974), ‘On the Characterisation of Aggregate Excess Demand’, Journal of Eco-nomic Theory, Vol. 7, pp. 348–353.
Mas-Colell, A., Whinston, M. D. and Green, J. R. (1995), Microeconomic Theory, New York, Oxford: Oxford University Press.
Pancs, R. and Vriend, N. J. (2007), ‘Schelling’s Spatial Proximity Model of Segregation Revisited’, Journal of Public Economics, Vol. 91, pp. 1–24.
Poincaré, H. (1908), Science et Methode, Paris: Flammarion.
Rodrik, D. (2015), Economics Rules: The Rights and Wrongs of the Dismal Science, New York:
W. W. Norton & Co.
Romer, P. (2016), ‘The Trouble With Macroeconomics’, The American Economist, forthcoming.
Saari, D. and Simon, C. P. (1978), ‘Effective Price Mechanisms’, Econometrica, Vol. 46, pp. 1097–1125.
Schelling, T. S. (1978), Micromotives and Macrobehavior, New York: W.W. Norton & Co.
Simon, H. (1984), ‘On the Behavioral and Rational Foundations of Economic Dynamics’, Journal of Economic Behavior and Organisation, Vol. 5, No. 1, pp. 35–55.
Simon, H. (1962), ‘The Architecture of Complexity’, Proceedings of the American Philosophical Society, Vol. 106, No. 6, pp. 467–482.
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Vinkovic, D. and Kirman, A. (2006), ‘A Physical Analogue of the Schelling Model’, Proceed-ings of the National Academy of Sciences, Vol. 103, pp. 19261–19265.
Walras, L. (1877), Elements d’economie politique pure ou Theorie de la Richesse Sociale, First Edi-tion, Lausanne: L. Corbaz.
For books which adopt similar approaches, start with the classic:
Schelling, T. S. (1978), Micromotives and Macrobehavior, New York: W.W. Norton & Co.
Other references, particularly for agent-based modelling:
Caiani, A., Russo, A., Palestrini, A. and Gallegati, M. (2016), Economies With Heterogeneous Interacting Agents: A Practical Guide to Agent Based Modelling, New York: Springer Verlag.
Epstein, J. M. (2007), Generative Social Science: Studies in Agent-Based Computational Mod-eling, Princeton, NJ: Princeton University Press.
Epstein, J. M. (2014), Agent Zero: Toward Neurocognitive Foundations for Generative Social Science, Princeton Studies in Complexity, Princeton, NJ: Princeton University Press.
Miller, J. and Page, S. (2007), Complex Adaptive Systems: An Introduction to Computational Models of Social Life, Princeton and Oxford: Princeton University Press.
A collection of earlier articles in:
Arthur, W. B., Durlauf, S. N. and Lane, D. (eds.) (1997), The Economy as an Evolving Com-plex System II, Redwood City, CA: Addison Wesley.
Just in case you might think that the crisis is new:
Reinhart, C. M. and Rogoff, K. S. (2010), This Time Is Different: A Panoramic View of Eight Centuries of Financial Crises, Princeton, NJ: Princeton University Press.
A reaction of policy makers:
Turner, A. (2013), Economics After the Crisis: Objectives and Means, Cambridge, MA: MIT Press.
A sociological approach:
Granovetter, J. (1997), Society and Economy: The Social Construction of Economic Institutions, Cambridge, MA: Harvard University Press.
Lessons from social insects:
Gordon, D. (2010), Ant Encounters: Interaction Networks and Colony Behavior, Princeton:
Princeton University Press.
Seeley, T. (2012), Honeybee Democracy, Princeton: Princeton University Press.
Introduction
Neoclassical economics is a school of economic thought that is dedicated to analysing capitalism – a fact that is reflected in its theoretical assumptions. Since co-operatives rep-resent an alternative form of economic organisation to capitalism, they require an alter-native economic theory. The classic division between supply and demand dissolves in an organisation where producers and consumers co-operate over production standards, price and quantity. Nor are co-operatives driven by classic capitalist motivations such as profit and growth. For a co-operative, profits are surpluses, and deriving them needs to be balanced against fair terms and conditions for employees and suppliers.1 Growth is desirable only up to a certain size, at which point the requirement for engagement and shared decision making is made more difficult by the sheer number of people involved.
In this chapter I address some key economic questions. However, instead of making assumptions tailored to the capitalist system, I will work from the understanding that resources should be fairly shared and the needs of producers and consumers balanced rather than in competition. This leads us to some quite distinct ideas about the optimal structure of markets and economic organisations.
So what is a co-operative? According to the International Co-operative Alliance,
“a co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.” The word ‘autonomous’ is important since it requires that membership is voluntary and workers or customers cannot be required to join a co-operative in order to work or shop there. The nature of democratic control of the enterprise differs from co-operative to co-operative depending on size and sector, but it does not conform to the traditional, hierarchical management structure of a capitalist enterprise.
Co-operatives are often established when people discover that the capitalist economy is not meeting their needs. For example, somebody might need housing and discover
Co-operative economics
Molly Scott Cato
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that if they join with other people in the same situation, they can improve their ability to buy property, thus creating a housing co-operative. In a similar way, the co-operatives that still dominate the market for whole foods in the UK were a response by individual consumers who found they could not buy the natural, organic food they wanted to eat.
The co-operative movement actually began in the food sector, with working people creating their own supply networks to avoid being exploited by monopolistic shops.
The definition also stresses the importance of working together to solve problems.
As Co-operatives UK explains: “What makes co-operatives unique is that they are run not by institutional investors or distant shareholders, but by their members. People like you and me – customers, employees, residents, farmers, artists, taxi drivers”. This shar-ing impulse explains why in some sectors, particularly the financial and health sectors, co-operatives are sometimes referred to as ‘mutuals’. The mutual ethic also helps explain the different and more equal relationship between producers and consumers that typifies co-operative businesses. Producers and consumers can cut out the middle man, ensuring lower prices for consumers and higher returns for producers. As we will see later, this was a central motive for the original foundation of co-operatives.
This is not a mere theoretical discussion. Across the world today, millions of people are members or employees of co-operatives. Across many different sectors such as agri-culture, housing, finance or retail, there are co-operatives operating successfully as an alternative to the private business model. This means that it is possible to organise almost every aspect of your life under the co-operative aegis. Co-operatives are found in every corner of the world and are among the biggest businesses: for example, the Zen-Noh, the National Association of Agricultural Co-operatives in Japan, had an annual turnover of $57 billion in 2012, more or less matching the turnover of the French co-operative supermarket Leclerc.
The chapter begins with a brief introduction to the theory and history of co-operative economic activity. It moves on to question the basic assumption of a capitalist economy:
namely, that resources are owned by private interests and that most people must make a living in the absence of resources and through their own work. The next section explores how a system of production and distribution might work if we looked at society as a whole and considered all its members as playing a role on both the production and con-sumption sides of the economy. The following section considers the issue of exchange of goods between companies and nations and how this might be conceptualised from within a co-operative paradigm. Finally, I explore how a co-operative economy might have an impact on wider society, and the spillover effects that might arise if economic organisations operated according to co-operative principles.