[Husky]

Well, before we get into this too deeply, could I perhaps ask you to provide me with an historical example of what you would consider to be a free market? Because I will say this--there has never been a situation in human history where any economy has operated along the lines that the Austrian School typically defines as a free market.

Note: I am not an AnCap. I recognize the state with a sole purpose of being a Nightwatchman State.

Your question is rather meaningless. Whenever countries have applied free market principles, immense success has followed. I never claimed free markets have existed, nor that they can exist. My stance is that their principles bring about wealth and success when applied.

You state that free markets cannot exist. Care to provide a reason?

[SueDeNîmes]

I think you misunderstood that paragraph.

I don't. I've seen plenty from that author conflating privateness with market mechanisms, for which it's neither a necessary or sufficient condition.

Also, most of what he says here about public sector financing is a) simply ignorant about public sector financing and b) irrelevant since the public sector mostly does stuff the private sector wouldn't or in which there are natural impediments to market mechanisms.

[Someone5]

Please list the examples of government agencies out-performing the private sector, so that we (I) can assess the other variables involved.

Education, health care, electrical service, water services, law enforcement, military defense, waste management, environmental protection...

Education and health care aren't even remotely debatable. Before you jump on the "public education in the US sucks!" train, I'm actually referring to global trends. Being public is no protection from incompetence, just as being private is no protection from incompetence.

Let us ask ourselves, What is economic efficiency?

According to Wikipedia: "...refers to the use of resources so as to maximize the production of goods and services."

"The use of resources so as to maximize the happiness of the economic participants." That's the definition I'll agree with.

So, how is productive efficiency maximized (yes, by definition)? It occurs when the production of a good is achieved at the lowest resource (input) cost possible, given the level of production of other good(s). And hence, it occurs when the highest possible output of one good is produced, given the production level of the other good(s).

Productive efficiency is maximized when the highest output of a definite pool of labor is reached. There is no way to determine whether your algorithm for doing so is the most optimal algorithm. It's a problem with how value is understood. Setting aside the LTV theory (since it has a different problem in this context), the subjective theory of value itself implies that economic efficiency is a multi-modal problem of an extreme nature--almost the entire set of solutions is most optimal to someone or another. Markets don't actually solve any of this. Markets resolve pareto efficiency problems, but that is orthogonal to the modal problem implied by the STV, and markets do not solve that modal problem.

That said, pareto efficiency problems don't actually require markets to solve. There's about a million ways to solve pareto efficiency problems with computers--it's done all the time in process control, for example, without any reference to a market whatsoever. Markets are not an exclusive way to solve such optimization problems. They're not even a particularly good way to solve them. It's mostly just an historical artifact; we use markets because when capitalism was coming about it was the best option among a set of very poor options.

Lets be very specific here. When you are talking about markets being a solution to economic efficiency, you are very specifically taking about markets being a method of finding a pareto optimal solution to the problem of competing objectives. One among many potential methods.

Now, what increases productive efficiency? How does the private sector accelerate production, drive down input costs, and simultaneously improve quality?

Depends on the circumstances.

How does the government do the same?

Basically the same ways, and in a similarly circumstantial manner.

What can the private sector do that government cannot (yes, by definition)?

Absolutely nothing.

But what compels a government agency to be highly competitive?

Because they desire to exceed expectations (you'd be shocked at how often this is the case), because they need to prove themselves capable in the face of public mistrust (such as after a major scandal), because their upper leadership is politically appointed and political leaders like to seem competent for electoral reasons, because legislative committees who determine budgets demand evidence the money is well spent... There's lots of reasons, actually. One of the most basic is simply the culture of the agency in question. A lot of smaller agencies--the ones that do not often make headlines--try to be highly competitive simply because that value has been inculcated in the workforce by a succession of skilled administrators.

More basically than that, simple human pride plays a role too. The people who work in these agencies are human beings too, and people often like to take pride in what they do. Ultimately that plays a role too, one that you seem to be cynically dismissive about.

What compels the private sector to be highly competitive? Think about these questions...

I have thought about these questions; profit is a poor motivator. Obviously, since businesses are often so bad at making it.

How does a government make choices and measure its opportunity costs?

"Governments" as a whole make choices and behave primarily along the lines of influence that exist within the bureaucracy. Legislators and elected officials set broad goals, but how that translates into specific policy is often up to bureaucrats. Ultimately, the decisions get made in favor of the policies that favor the groups within the bureaucracy with the most pull. In the end, those decisions are usually relatively intelligent in that context, but difficult to understand from outside (because you're lacking critical information).

That said, within agencies this sort of decision-making varies wildly by the culture of the agency in question, usually with quite a lot of people providing input on it. I'll be the first to say that a lot of decisions that come down from agencies seem incomprehensible until you get the rest of the story. There are a lot of competing thought processes that go into crafting policy, and there are just as many rational forward-thinkers as there are reactionary short-term thinkers. A lot of perspectives get represented in the end.

Opportunity costs get measured by prediction of public response--just like private companies try to predict changes in demand stemming from decisions they make.

Define 'mixed bag of results'.

Some gems, some crap, some good things, others merely acceptable.

How does a profit and loss system influence a businesses' decision making?

In practice, their decisions are not actually made on that basis. Profit is a mileau, a context, a setting in which normal organizational decision-making happens. There is always an awareness that profit is the ultimate goal, but that doesn't mean that every decision is made by weighing it against profitability. Personality conflicts, corporate culture, reputation, current trends, informational disparities... all of these things play as much or more of a role in actual day-to-day decision making than some abstract notion of profit.

Please, explain point 1 as to how Rothbard is "not telling the truth"?

"There is a fatal flaw that permeates every conceivable scheme of government enterprise and ineluctably prevents it from rational pricing and efficient allocation of resources," is a bald faced lie. It is stated as if it were an incontrovertible fact, but it is Rothbard's opinion.

"It is the fact that government can obtain virtually unlimited resources by means of its coercive tax power. Private businesses must obtain their funds from investors." This statement is a profound misunderstanding of how agencies view funding, and how they actually make budget-related decisions. Agencies don't see themselves as having an "unlimited pool of resources." Quite the contrary actually. Government agencies are more budget conscious that private companies! A lot of their more ridiculous stunts occur because of that near-obsession with their budgets--the crazy stories about waiting a year for basic office supplies and such. That sort of internal nonsense is directly driven by obsession over their very limited budgets. Rothbard is betraying his utter ignorance of the interior workings of government agencies here. If you want to understand why agencies make the decisions they do, you can never forget the fact that government agencies are budgeted in advance; they know in advance how much money they will have for the year, and they will go to crazy lengths to make sure they spend exactly that much money. They don't want to go under (because then their budget gets cut), but they don't want to go over either (because that means they have to go through crazy hoops and put on the lipstick for kissing some senator's asses). They absolutely do not see themselves as being able to tap the taxpayers whenever they need some more money--because that's absolutely not how it works. In the same way that he seems to think "obtaining funds from investors" instills some sort of discipline in private companies, agencies have to get their funds from Congress, and that instills some discipline too (though not the same sort of discipline).

" Government, on the other hand, can get as much money as it likes." This is also strictly untrue. While in theory it would be possible to have a 100% tax on the whole GDP of the nation, in practice that's not even remotely the case. Government revenue is driven by political pressures; when taxes or perceived debt burdens are too high, businesses and the public push back on elected officials and either force them to change their policies or kick them out of office. We can see that tension right now, in fact with the massive amount of people who voted against the incumbent in the last election because they held them responsible for "taxes being too high" and because they felt the national debt was a danger to their security. This is the way the government limits itself. It's a feedback mechanism that Rothbard utterly dismisses.

"It thereby provides a means for businessmen to allocate resources and to price services to insure such optimum use." Except that they don't actually do that. More correctly, it provides a means by which businessmen, if they were to choose to do so, could price services to ensure optimum use. It's a choice. Which businessmen don't often make. Because instead they'll price services to insure that they make the most money--which is certainly not always the optimum use (as we saw with the housing crisis, etc).

"Government, however, has no checkrein on itself, i.e., no requirement for meeting a profit-and-loss test of valued service to consumers, to enable it to obtain funds." Governments certainly do have such mechanisms, as I have described elsewhere. This is another outright lie by Rothbard.

" Private enterprise can get funds only from satisfied, valuing customers and from investors guided by profits and losses." Investors are guided by a hell of a lot more than just profits and losses. Their perception of the world is greatly distorted by "market sentiments," personal ideology, limits on information, insider information, etc. Not to mention the fact that assuring their own personal profits does not mean seeking the overall optimum economic solution for everyone. It means choosing the solution from the set that best benefits them; that is not even remotely the pareto optimum choice for the economy as a whole. In other words, while the statement may be true, it does not actually mean what Rothbard meant for it to imply.

"Government can get funds literally at its own whim." Only if one ignores the ability to move to another country. Another lie; not only is it a factual inaccuracy, it is utterly ignorant of the actual political limits of governments.

Can you please explain point 2 to myself (and Rothbard), please. Because I have no idea.

I rolled it into my critique of Rothbard's quote.

[Someone5]

Your question is rather meaningless. Whenever countries have applied free market principles, immense success has followed.

Name one. The United States had its greatest periods of growth under extensive government intervention and immense collective coercion. The United Kingdom industrialized only through the help of massive government intervention, government subsidies, and forcible enclosing of the commons. Germany became an industrial power only because of incredible political will and decades of deep economic planning. The Soviet Union industrialized within a generation, a feat no "free market" society had ever managed. The Chinese have recently been an amazing rising star... because they have an intricately planned state capitalist economy.

Let's look at one of the most famous counter-examples--Chile--which became a complete economic basket case as a result of the Austrian policies they followed.

Who, exactly, found great success by following "free market principles"? Because apparently the only way you find success with free market principles is by claiming to follow them while actually ignoring them.

I never claimed free markets have existed, nor that they can exist. My stance is that their principles bring about wealth and success when applied.

So provide an example of it.

You state that free markets cannot exist. Care to provide a reason?

Property precludes freedom.

[Husky]

I'm a little drunk right now and it's late. I'll reply in the morning as best I can. There's a lot of substance there, so thank you.

Property precludes freedom

Considering we were going to inevitably disagree on this issue, please sketch out for me how property precludes freedom

[Someone5]

Is that a red flag I see?

I have trouble pinning down my own political beliefs. Somewhere rather closer to anarcho-syndicalism than communism. Definitely on the left though.

[Someone5]

Considering we were going to inevitably disagree on this issue, please sketch out for me how property precludes freedom

That's pretty basic. If you claim to own something and a bunch of folks with guns (the government, your private defense contractor, whatever) agrees with you, then by definition I am not free to use that same thing without first having to challenge the folks with guns. Property, by definition, poses a restriction on the behavior of everyone but the owner. A society built around the notion of property cannot be free as a consequence of this. Property necessarily imposes harsh limitations on human freedom.

[Husky]

Sorry if that post was rude. I regretted it after posting it and edited it as you can see. Regardless of your ideology, I should stick to the topic.

You have posted a lot above and I promise to try cover it all in the morning. I just hope you haven't made up your mind too much when it comes to the concept of property. I mean, reading the above on such fluffy concepts like human freedom
don't make me confident one bit on the stalemate we're heading at.

I like your posts though. the above were interesting, I must say. I just think you have a few critical misconceptions about the nature of profit and loss. Which is more important do you think? The profit motive or loss part?

[Husky]

double post*

[Husky]

Education, health care, electrical service, water services, law enforcement, military defense, waste management, environmental protection...

I won't go into how the government drives up education costs because, as displayed below, you don''t want to hear it. I am surprised you put environmental protection. Very surprised, in fact. The U.S government is a huge polluter and doesn't care about its actions.

Education and health care aren't even remotely debatable. Before you jump on the "public education in the US sucks!" train, I'm actually referring to global trends. Being public is no protection from incompetence, just as being private is no protection from incompetence.

Nowhere did I say that private enterprises are infallible. On average, they are more successful than the public sector.

Productive efficiency is maximized when the highest output of a definite pool of labor is reached. There is no way to determine whether your algorithm for doing so is the most optimal algorithm. It's a problem with how value is understood. Setting aside the LTV theory (since it has a different problem in this context), the subjective theory of value itself implies that economic efficiency is a multi-modal problem of an extreme nature--almost the entire set of solutions is most optimal to someone or another. Markets don't actually solve any of this. Markets resolve pareto efficiency problems, but that is orthogonal to the modal problem implied by the STV, and markets do not solve that modal problem.

I thought this discussion was the merits of government vs the private sector. Please describe how government solves the problems you have raised.

That said, pareto efficiency problems don't actually require markets to solve. There's about a million ways to solve pareto efficiency problems with computers--it's done all the time in process control, for example, without any reference to a market whatsoever. Markets are not an exclusive way to solve such optimization problems. They're not even a particularly good way to solve them. It's mostly just an historical artifact; we use markets because when capitalism was coming about it was the best option among a set of very poor options.

Really? Not particularly good? Please show how.

Lets be very specific here. When you are talking about markets being a solution to economic efficiency, you are very specifically taking about markets being a method of finding a pareto optimal solution to the problem of competing objectives. One among many potential methods.

All allocative efficiency solutions are pareto efficient. But there are non-allocative pareto efficient solutions as well. I'm not sure your point here.

Now, what increases productive efficiency? How does the private sector accelerate production, drive down input costs, and simultaneously improve quality?

Depends on the circumstances.

Let's say, in typical circumstances.

How does the government do the same?

Basically the same ways, and in a similarly circumstantial manner.

I disagree, unless you can prove your claims.

]What can the private sector do that government cannot (yes, by definition)?

Absolutely nothing.

Are you sure about that?

]But what compels a government agency to be highly competitive?

Because they desire to exceed expectations (you'd be shocked at how often this is the case), because they need to prove themselves capable in the face of public mistrust (such as after a major scandal), because their upper leadership is politically appointed and political leaders like to seem competent for electoral reasons, because legislative committees who determine budgets demand evidence the money is well spent... There's lots of reasons, actually. One of the most basic is simply the culture of the agency in question. A lot of smaller agencies--the ones that do not often make headlines--try to be highly competitive simply because that value has been inculcated in the workforce by a succession of skilled administrators.

I wish this was true in the real world. I am talking about something that forces a government agency to be competitive. Not what, in theory, could make them more competitive.

More basically than that, simple human pride plays a role too. The people who work in these agencies are human beings too, and people often like to take pride in what they do. Ultimately that plays a role too, one that you seem to be cynically dismissive about.

Bureaucrats =/= entrepreneurs. Remember that.

What compels the private sector to be highly competitive? Think about these questions...

I have thought about these questions; profit is a poor motivator. Obviously, since businesses are often so bad at making it.

I think you need to take a Econ 101 class. Profit is not some sort of mystical juju;profits are an indicator that resources were put to valuable use. You mention 'profit is a poor motivator', but you fail to consider the *MUCH* more important part of that equation: the loss part. The fear of a loss is as big of a motivator as profit.

How does a government make choices and measure its opportunity costs?

"Governments" as a whole make choices and behave primarily along the lines of influence that exist within the bureaucracy. Legislators and elected officials set broad goals, but how that translates into specific policy is often up to bureaucrats. Ultimately, the decisions get made in favor of the policies that favor the groups within the bureaucracy with the most pull. In the end, those decisions are usually relatively intelligent in that context, but difficult to understand from outside (because you're lacking critical information).

How do you think this method compares with the private sector in effectiveness?

Opportunity costs get measured by prediction of public response--just like private companies try to predict changes in demand stemming from decisions they make.

Which measure is more effective?

In practice, their decisions are not actually made on that basis. Profit is a mileau, a context, a setting in which normal organizational decision-making happens. There is always an awareness that profit is the ultimate goal, but that doesn't mean that every decision is made by weighing it against profitability. Personality conflicts, corporate culture, reputation, current trends, informational disparities... all of these things play as much or more of a role in actual day-to-day decision making than some abstract notion of profit.

I have concluded you do not understand what profit means in the context of business decision making.

That's pretty basic. If you claim to own something and a bunch of folks with guns (the government, your private defense contractor, whatever) agrees with you, then by definition I am not free to use that same thing without first having to challenge the folks with guns. Property, by definition, poses a restriction on the behavior of everyone but the owner. A society built around the notion of property cannot be free as a consequence of this. Property necessarily imposes harsh limitations on human freedom.

No point in discussing this. We both know each other's argument.

[Baff]

]Then "here" is apparently unique since everywhere else with co-ops has successful examples, including 2 big supermarket chains in Britain (as you'd know if you'd read the post immediately before yours).

Co-op stores are the same people who run Co-op bank.

They are so successful that they are currently floating on the stock exchange this week to raise money.

It seems they've gone bust and are adopting the capitalist model to stay in business. So much for their principles.



John Lewis is a better example but this is not a co-op business model. The owner left the company to his work force in his will.
This is essentially a capitalist business model but when the owner died, the owners shares were handed out amongst his employee's.


@Someone 5
Private education and private health care is markedly superior to state provide education and healthcare in the UK. No idea about the US or other places.
But here... the state provided stuff is quite second rate.
All the top schools and all the top universities here are private. I'd be surprised if this was not broadly true worldwide.

[ronimacarroni]

Co-op stores are the same people who run Co-op bank.

They are so successful that they are currently floating on the stock exchange this week to raise money.

It seems they've gone bust and are adopting the capitalist model to stay in business. So much for their principles.



John Lewis is a better example but this is not a co-op business model. The owner left the company to his work force in his will.
This is essentially a capitalist business model but when the owner died, the owners shares were handed out amongst his employee's.


@Someone 5
Private education and private health care is markedly superior to state provide education and healthcare in the UK. No idea about the US or other places.
But here... the state provided stuff is quite second rate.
All the top schools and all the top universities here are private. I'd be surprised if this was not broadly true worldwide.

Well I don't know about Britain, but here in the US private school teachers on average get paid less than their public school counterparts.
Private schools also have to worry about profit, whereareas public school only focus is teaching and learning.
US Public schools do have some issues at the moment such as teachers unions and the department of education being overbearing.
I have a feeling though there are fat cats placing their bets on the system's failure so they can impose state subsidies on a for profit school scheme and privatize yet another perfectly good government service.

[SueDeNîmes]

Co-op stores are the same people who run Co-op bank.

They are so successful that they are currently floating on the stock exchange this week to raise money.

It seems they've gone bust and are adopting the capitalist model to stay in business. So much for their principles.

Is this supposed to contradict something I've said ?

John Lewis is a better example

Of what ?

but this is not a co-op business model. The owner left the company to his work force in his will.
This is essentially a capitalist business model but when the owner died, the owners shares were handed out amongst his employee's.

A quick google reveals that he died in 1928 leaving 2 stores to his son who introduced the co-op model under which John Lewis expanded to become Britain's third largest private company.

Which is unusual and not particularly relevant. Co-ops generally are at an inherent disadvantage in a capitalist environment for reasons that have nothing to do with their ability to knock out goods and services.

[Baff]

No mate, that's not to contradict you, only to update you.

Co-op failed. It went bust.

Now Co-op is going to be as capitalist as everywhere else.



So your examples, (the same examples I used to give), are out of date.


John Lewis is better example of a company in which the workers have ownership.
The Co-op was never solely owned by it's workers anyway. It always had bondholders. That all said I would usually have given the Co-op as my example of a successful model for a workers co-operative. Now I need to find a new one.
As you rightly note, John Lewis is not a Co-op done good. It was a very successful family business that later adopted a co-operative ethos.

John Lewis is not now, nor has it ever been Britians third largest company. Not even in that league.
I'll give three quick examples of bigger. HSBC. BP. Shell. (The top three UK businesses according to Forbes).
These three are not only in the UK top ten, they are also in the global top ten.


Co-ops are not traditionally very impressive organisations. Typically they suck.
A certain kind of person who doesn't integrate well in normal society goes to a co-op where he can hang out with fellow misfits.
It's not some revolution in human co-operation.

It's where drongoes and drop outs congregate.

As it happens, that such people can prosper together and live the way they want to live together is extremely cool. This is the kind of world in which I aspire to live.
But it would be a massive mistake to try and pretend that these are highly efficient and productive people. A step forward in humanities evolution. They aren't.

It's a niche model. Perfect for a certain type of person.
Most people however are able to co-operate collectively on a far more socially integrated model. They can do "mainstream" as well as just niche.

[Baff]

Well I don't know about Britain, but here in the US private school teachers on average get paid less than their public school counterparts.
Private schools also have to worry about profit, whereareas public school only focus is teaching and learning.
US Public schools do have some issues at the moment such as teachers unions and the department of education being overbearing.
I have a feeling though there are fat cats placing their bets on the system's failure so they can impose state subsidies on a for profit school scheme and privatize yet another perfectly good government service.

In the UK all the private schools I've ever worked for have been non-profit organisations. Typically charities.
The deal is, we pay ourselves higher wages instead of taking a profit.

I have attended both private and state schools both in my capacity as a student and later in life as a teacher.
A couple of state schools have been on a par with the private ones. Most not close.

Private schools in the UK operate at much higher standards. Not just in terms of class sizes, facilities and subjects taught but critically in terms of results.
At my private school the very lowest O level results any of our students, even the thickest of thick achieved, was double the national average.

In my heart of hearts I believe that the primary actor in this is selective enrolement. They only let the smartest kids attend.

It is true however that I never got paid anything like as much in the private sector, but then in the private sector I got to have a much nicer job with much nicer students and I don't have to live with the ignominy of working for the govt or the selfish ideology of the unionists.

If it's all about the money, in my opinion, teaching isn't for you.

[SueDeNîmes]

No mate, that's not to contradict you, only to update you.

Co-op failed. It went bust.

Now Co-op is going to be as capitalist as everywhere else.



So your examples, (the same examples I used to give), are out of date.


John Lewis is better example of a company in which the workers have ownership.
The Co-op was never solely owned by it's workers anyway. It always had bondholders. That all said I would usually have given the Co-op as my example of a successful model for a workers co-operative. Now I need to find a new one.
As you rightly note, John Lewis is not a Co-op done good. It was a very successful family business that later adopted a co-operative ethos.

John Lewis is not now, nor has it ever been Britians third largest company. Not even in that league.
I'll give three quick examples of bigger. HSBC. BP. Shell. (The top three UK businesses according to Forbes).
These three are not only in the UK top ten, they are also in the global top ten.


Co-ops are not traditionally very impressive organisations. Typically they suck.
A certain kind of person who doesn't integrate well in normal society goes to a co-op where he can hang out with fellow misfits.
It's not some revolution in human co-operation.

It's where drongoes and drop outs congregate.

As it happens, that such people can prosper together and live the way they want to live together is extremely cool. This is the kind of world in which I aspire to live.
But it would be a massive mistake to try and pretend that these are highly efficient and productive people. A step forward in humanities evolution. They aren't.

It's a niche model. Perfect for a certain type of person.
Most people however are able to co-operate collectively on a far more socially integrated model. They can do "mainstream" as well as just niche.

Right so presumably all the non-mutual bank failures indicate an even worse model. Ta for the "update" but I did know about the Coop Bank when explicitly refering to their profitable supermarket chain. I'm not sure about its other services (Pharmacy, Legal, Funeralcare, Motors, On-line Electrical) and will just have to take your word on the "drongoes" thing.

John Lewis was indeed "the third largest UK privately owned company according to the Sunday Times Top Track 100 for 2010. HSBC, BP and Shell aren't even in the top million since they're publicy traded.

[Baff]

Co-op bank is part of the co-op group. It's 1.5 billion loses have taken them all down.

Publicly traded companies are all privately owned too.
Shareholders are not governments, they are members of the public who either own shares directly, or indirectly through their pension schemes.


Non mutual banks are safer to operate than mutuals.
The reason is if you get caught out like the Co-op just has and find yourself with a 1.5 billion shortfall, you don't have to close the bank at this time if you can raise that 1.5 billion on the stock market.

Which is what Co-op bank intends to do.

Raising money on the stock market is quick.
The only way a mutual has to raise money is through increased customer deposits. Which is slow and unpredictable.
They need 1.5 billion yesterday to meet their regulatory obligations.

None of their mutual members has stepped forward to bail them out.
They can either become a public bank, or close.



Businesses fail. Mutual or otherwise. The business that cannot fail has not been created yet.
A buisiness model is not invalidated by the failure of a company operating it.
So a few banks failed in the crash... but the vast bulk of them are still able to make money and do.

Equally if I place a Starbucks next to a Costa Coffee, despite both using the same business model, one of them will fail.
There is no guarentee of success in this life.

There is no reason for you not to start your own co-operatively managed grocery store if you wish to.
The model is sound even if example operators of it are not.
Personally I'd just run it myself individually, but if you need to group think to do something so simple... go for it. You can do it.

Remember though, economies of scale cut both ways. Many things in business become more expensive or harder to operate the larger they become.

[SueDeNîmes]

Co-op bank is part of the co-op group. It's 1.5 billion loses have taken them all down.

I doubt it, but it still wouldn't have anything to do with it being a co-op.

Publicly traded companies are all privately owned too.

With a distinction everyone else recognises.

Shareholders are not governments, they are members of the public who either own shares directly, or indirectly through their pension schemes.


Non mutual banks are safer to operate than mutuals.
The reason is if you get caught out like the Co-op just has and find yourself with a 1.5 billion shortfall, you don't have to close the bank at this time if you can raise that 1.5 billion on the stock market.

Which is what Co-op bank intends to do.

Raising money on the stock market is quick.
The only way a mutual has to raise money is through increased customer deposits. Which is slow and unpredictable.
They need 1.5 billion yesterday to meet their regulatory obligations.

None of their mutual members has stepped forward to bail them out.
They can either become a public bank, or close.



Businesses fail. Mutual or otherwise. The business that cannot fail has not been created yet.
A buisiness model is not invalidated by the failure of a company operating it.
So a few banks failed in the crash... but the vast bulk of them are still able to make money and do.

Equally if I place a Starbucks next to a Costa Coffee, despite both using the same business model, one of them will fail.
There is no guarentee of success in this life.

There is no reason for you not to start your own co-operatively managed grocery store if you wish to.
The model is sound even if example operators of it are not.
Personally I'd just run it myself individually, but if you need to group think to do something so simple... go for it. You can do it.

Remember though, economies of scale cut both ways. Many things in business become more expensive or harder to operate the larger they become.

Correct : "A business model is not invalidated by the failure of a company operating it." So I'm really not sure what or whom the rest is supposed to be addressing.

[Baff]

The most important part of that has been bolded.
I'll re-iterate.

Not all economies of scale increase productivity and efficiency. A great many of them reduce productivity.

For example, if I wish to do something in my company, I just do it. It takes as long for me to do as it takes for me to think of it and then physically do it.

But in a co-operative endeavour... it turns into a mothers meeting. First I think of it, then I have to call a meeting to propose it to all the others and then some will disagree or take time to be persuaded.
Some will turn up late. Some will be off sick so I will have to wait until they get well enough to attend and so on.

Or worse you could get into it with some over ideological arsewipe. For whom what you are proposing is in someway akin to him with giving Satan blowjobs. Resulting in the total paralysis of your business.

Imagine if when Jose Mourinho decided which players to deploy on the pitch he had to call a vote first!. That decision needs to be made in under a second.
There is such a thing as a one man job. There is such a thing as being able to do something on your own.

Add complexity where none is required and you make yourself less efficient not more efficient.
Too many cooks spoil the broth as they say.

[Baff]Co-op bank is part of the co-op group. It's 1.5 billion loses have taken them all down.[/baff]I doubt it, but it still wouldn't have anything to do with it being a co-op..

It's problem is entirely because it is a co-op which is precisely why it is going public to save itself.

Without shareholder investment it simply has no chance of being able to cover it's loses fast enough to stay in business.
Push has come to shove and it's co-op principles are being abandoned to save the livelihoods of all it's members.

The problem is under their co-op principles, they can't get enough customers. (or depositors in this case).

The same problem others in the group have.

Co-op grocery stores are shit. They sell shit quality food in dirty conditions at high prices. They don't have much parking and they don't have much stock.
How can they compete with Tescos? They can't.

Not mainstream enough.
They know what a niche in the community wants and are willing to pay for (politically "right on" business), but they are not in tune with the rest of us, who want decent produce at decent prices and a very wide selection of goods from which to choose from and we don't give a shit about GM foods or fair trade coffee or whether or not you have shareholders or pay yourself higher wages instead. Could not care less.

If you place yourself in a niche market... you are not going to be able to exploit so many economies of scale as someone who caters to the mainstream market.
It's just a simple numbers game.

So niche is great as long as your niche is big enough to support you. In the Co-op example it has turned out not to have been. But for a long time it was and certainly there are plenty of other niches out there.
But if you do choose to limit your operations in some way, ideologicaly or whatever... you are limiting your operations, and not... best positioning yourself for world domination.
Co-op < Tescos. Co op < HSBC.

[SueDeNîmes]

The most important part of that has been bolded.
I'll re-iterate.

Not all economies of scale increase productivity. A great many of them reduce productivity.

For example, if I wish to do something in my company, I just do it. It takes as long for me to do as it takes for me to think of it and then physically do it.

But in a co-op... it turns into a mothers meeting. First I think of it, then I have to call a meeting to propose it to all the others and then some will disagree or take time to be persuaded.
Some will be off sick so I will have to wait until they get well enough to attend and so on.

Or worse you could get into it with some over ideological arsewipe. For whom what you are proposing is in someway akin to him with giving Satan blowjobs. Resulting in the total paralysis of your business.

Imagine if when Jose Mourinio decided which players to deploy on the pitch he had to call a vote first!. That decision needs to be madein under a second.
There is such a thing as a one man job. There is such a thing as being able to do something on your own.

Add complexity where none is required and you make yourself less efficient not more efficient.
Too many cooks spoil the broth as they say.

Nah : http://socialenterprise.guardian.co.uk/social-enterprise-network/2013/jun/25/coop-myths-decision-making Co-operative myths: how many co-operators does it take to change a lightbulb?

It's problem is entirely because it is a co-op which is precisely why it is going public to save itself.

Without shareholder investment it simply has no chance of being able to cover it's loses fast enough to stay in business.
Push has come to shove and it's co-op principles are being abandoned to save the livelihoods of all it's members.

Total non sequitur. The fact that it's having to go public doesn't mean its problem was caused by not being public. It's like saying a broken leg was caused by not wearing a splint.