Abstract
In a recent article in this Journal, VanSickle and Ladd (VL) presented an interesting economic analysis of the financial operations of a Section 521 cooperative. They also reported some surprising empirical results that suggested cooperatives should substitute equity capital (stock and deferred patronage refunds) for debt capital when the cooperative members' opportunity cost for capital is 12% and the interest rate for debt capital is between 7% and 10%. Intuitively, one would expect to obtain results that are exactly opposite to those of VL since debt capital has a lower cost than equity capital. Therefore, I believe VL's conceptualization of the cooperative objective should be scrutinized.
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