 Hi, this is Professor Gerald Friedman, Department of Economics, University of Massachusetts at Amherst. And I'd like to talk today about work of cooperation and productivity. First, why we would care. Productivity, for our purposes, we could think of as how much you get for what you put in. Now, usually people talk about this in terms of output per hour of work. How much, how many videos does Dan upload in an hour? How many cars does Dan make in an hour on an assembly line? How many student papers do I grade in an hour? And usually, we like productivity. I don't like to spend a lot of time grading papers, so if I can grade the papers faster, then that's good. As long as I continue to write useful comments and actually read the things and grade them fairly, doing all those things, if I can be more efficient, then generally would be a good thing. We like productivity. Productivity means that we're using our labor time efficiently, and we get more stuff. We are an efficient country in the United States. Our labor is efficient. We produce lots of stuff. We get lots of cars, planes, video games for an hour of work in the United States, more than is the case in most countries. Now, economists like productivity. They like productive firms. And they like to say that productive firms will drive out unproductive firms. Therefore, if we don't see worker cooperatives, this must be because they are unproductive. The chain of reasoning goes as follows. Productive firms can pay at the same wage rate as the unproductive firms. The productive firms, because they produce more per hour, more per dollar of wages, the productive firms will be able to sell their stuff more cheaply. The unproductive firms will either have to pay their workers a lower wage and therefore get worse workers, or they will have lower profits if they pay their workers the same wage and sell at a competitive price, or they won't be able to sell at a competitive price. Whichever way they deal with it, the lack of productivity will make them less competitive. They won't be able to get good workers, they won't be able to reinvest, or they won't be able to sell. So it's the productive firm that will drive out the unproductive firm. If we don't see a type of firm, it must be because they're unproductive. And orthodox economists have an explanation for why worker cooperatives are unproductive. And this has to do with a prisoner's dilemma. All the workers want the firm to be productive, but none of them want to be the person who goes out and works hard. In a capitalist firm, this problem is addressed because the manager tells everybody to work hard, well, be fired. In a worker cooperative, nobody is telling everybody else what to do. Lacking managers, you'd have to all get together at a meeting or something and decide how hard you're gonna work and then you have to police it. It's just all very complicated and doesn't work well. So the orthodox economists explained that worker cooperative will be less productive. The proof that they're less productive is that they're not around. The only problem with this is, empirically, it's wrong. Many, many studies have found that worker cooperatives are more productive than capitalist firms. And the more involved, the more power the workers have over the working arrangements within a cooperative, the higher the productivity. And there are good reasons for this. Reasons ignored in the orthodox model. Worker cooperatives economize on management. In American firms, as much as a third of the workers are managers who just kind of stand around watching other people work. Get rid of some of them and suddenly you're productive. Worker cooperatives also, while they don't have paid managers, in practice, all the workers act as managers over each other. Rather than being a problem of a prisoner's dilemma situation when nobody takes responsibility, a well-functioning worker cooperative has everybody taking responsibility. And they have an incentive because they all want the firm to succeed, so they keep their good jobs and maybe make profits. So everybody supervises while working. Worker cooperatives involve much better information exchange. The people on the shop floor have every incentive to report if they figure out a better way to do something. In a capitalist firm, if you figure out a better way to do something, you hold on to it and keep it to yourself so that you've got some recourse if they tell you to speed up or something. Certainly you don't want to tell them, tell the boss, you're great, no idea, why? What would you get out of it? So in practice, work cooperatives are more productive. How do we reconcile this with the market model that efficient firms should drive out inefficient firms? The answer is there must be something else stopping the spread of worker cooperatives. It's not the lack of efficiency, it's something else. And that's what we'll be talking about next time. Thank you and have a nice day. Bye-bye.