Economic appraisal of co-operative enterprise in the United States: Principles and issues

Abstract

Co-operatives are a unique type of enterprise with important differences from traditional firms. This paper explores these differences, with emphasis on the nature of their profits, entrepreneurial status, co-operative principles, transactional and cost differences and co-operative contributions to the economic system. Co-operative enterprises procure certain services for members at cost which distinguishes them from business firms which buy and sell products to make profits for the owners. Co-operation can be limited to two fundamental principles: services at cost and member control. Co-operatives aim to generate savings by providing members with goods and services more economically than they could obtain them from alternative sources. Thus, the co-operative intends to enhance profits in the individual businesses (or households) of members. However, members exercise entrepreneurial control over the co-operative—in much the same manner as do the owners of a business firm. Co-operatives aim to operate at different points on their short-run average cost curves than typical business firms and their differences in transactional perspective tend to increase competition in certain markets. Co-operatives frequently offer services firm entrepreneurs do not see fit to offer. Co-operatives thus have an important rôle in the US economic system.