Question

In the article “Co-op Economics” by Nancy Folbre, we read about the potential benefits and difficulties associated with cooperative firms. Imagine your friend Lucy is planning to start a gardening cooperative in the neighborhood with her childhood friends, and since you took an economics class she wants your advice. Using information from the reading, explain to Lucy what two potential difficulties are with starting a cooperative compared to a profit led firm, and what are two potential benefits? Explain!

Answer 1

Potential difficulties with starting a cooperative are diversified ideas and opinions . A cooprative is not run by single ownership ,so it may face snags due to diverse opinions of members . Thus Lucy might face different opinions of different people in the cooperative . Secondly , such shared ownership and little power of an individual owner does not attract investment capital . So cooperative becomes difficult to run .

A cooperative always has a broad knowledge base due to large number of members . Secondly , cooperatives share the risks among all its members and no single person gets affected alone . These are the potential benefits .