Cooperation

How important is cooperation in a market society?

First, what is cooperation? Suppose a number of individuals occupy a common social and geographical space. They have a variety of individual interests and things they value, and they have outcomes they'd like to bring about. Some of those outcomes are purely private goods, and some can be brought about through private activities by each individual.  These are the circumstances where private market-based activity can bring about socially optimal outcomes.

But some outcomes may look more like public or common goods -- for example, greater safety in the neighborhood or more sustainable uses of resources.  These are outcomes that no single individual can bring about, and -- once established -- no one can be excluded from the enjoyment of these goods.  (Public choice theorists sometimes look at other kinds of non-private goods such as "club goods"; see Dennis Mueller, Perspectives on Public Choice: A Handbook.)

Further, some outcomes may in fact be private goods, but may be such that they require coordinated efforts by multiple individuals to achieve them efficiently. An example of this is traditional farming: it may be that the yield on one individual's plot is greater if a group of neighbors provide concentrated labor on weeding this plot today and the neighbor's plot tomorrow than if each of us do all the weeding on our individual plots. The technical conditions surrounding traditional agriculture impose a cycle of labor demand that makes cooperation an efficient strategy.

This is where cooperation comes in. If a number of the members of a group agree to contribute our efforts to a common project we may find that the total results are greater -- for both common goods and private goods -- than if we had each pursued these goods through individual efforts. Cooperation can lead to improvement in the overall production of a good for a given level of sacrifice of time and effort.  This description uses the word "agree"; but Robert Axelrod (The Evolution of Cooperation) and David Lewis (Convention: A Philosophical Study) observe that many examples of cooperation depend on "convention" and tacit agreement rather than an explicit understanding among participants.

So cooperation can lead to better outcomes for a group and each individual in the group than would be achievable through entirely private efforts.

Cooperation should be distinguished from altruistic behavior; cooperation makes sense for rationally self-interested individuals if appropriate conditions are satisfied.  A cooperative arrangement can make everyone better off.  So we don't have to assume that individuals act altruistically in order to account for cooperation.

So why is cooperation not ubiquitous? It is in fact pretty widespread. But there are a couple of important obstacles to cooperation in ordinary social life: the rational incentive that exists to become a freerider or easy rider when the good in question is a public good; and the risk that cooperators run that the endeavor will fail because of non-contribution from other potential contributors. There is also often a timing problem: it is common for the contribution and the benefit to be separated in time, so contributors are even more concerned that they will be denied the benefits of cooperation. If Mr Wong is asked to weed today in consideration of assistance from Mr Li in harvesting the crop four months from now, he may be doubtful about the future benefit.

The basic logic of this situation has stimulated a mountain of great social science research and theory. Garrett Hardin's "tragedy of the commons" (Managing the Commons) and Mancur Olsen's The Logic of Collective Action: Public Goods and the Theory of Groups set the negative case for thinking that cooperation is all but impossible to sustain.  Elinor Ostrom's Nobel-prize winning work on common property resource regimes documents the ways in which communities have solved these cooperation dilemmas (Governing the Commons: The Evolution of Institutions for Collective Action). Douglas North essentially argues that only private property and binding contracts can do the job (The Rise of the Western World: A New Economic History). And Robert Axelrod has made the case for the rational basis of cooperation in The Evolution of Cooperation: Revised Edition. He argues that there are specific conditions that enhance or undermine cooperation and reciprocity; essentially, participants need to be able to reidentify each other over time and they need to have a high likelihood of continuing to interact with each other over an extended time. (His analysis is based on a series of experiments involving repeated prisoners' dilemmas.)

A market can "simulate" cooperation through enforceable contracts; so, for example, a peasant farming community could create a legally binding system of labor exchange among households.  And organizations can create quasi-binding agreements for cooperation through "memoranda of understanding" and "inter-governmental agreements" -- written agreements that may not be enforceable through legal remedies but nonetheless create a strong incentive for each party to fulfill the obligations of cooperation.  However, quite a bit of the opportunities for cooperation seem to fall outside the sphere of these formal and semi-formal mechanisms for binding agreements.

Informal cooperation needs some kind of institutional or normative setting that encourages compliance with the cooperative arrangement.  So there has been an energetic debate in the past twenty years over the feasibility of non-coercive solutions to cooperation problems; this is an area where the new institutionalism has played a key role.  And in the real world, we do in fact find numerous sustainable examples of informal cooperation.  Individuals work in community gardens; foundations join together in supporting urban renewal projects; villagers create labor-sharing practices.  But it is an interesting question to consider: are there institutional reforms that we could invent that would allow us as a society to capture more of the benefits of cooperation than we currently realize?

Cooperation

How important is cooperation in a market society?

First, what is cooperation? Suppose a number of individuals occupy a common social and geographical space. They have a variety of individual interests and things they value, and they have outcomes they'd like to bring about. Some of those outcomes are purely private goods, and some can be brought about through private activities by each individual.  These are the circumstances where private market-based activity can bring about socially optimal outcomes.

But some outcomes may look more like public or common goods -- for example, greater safety in the neighborhood or more sustainable uses of resources.  These are outcomes that no single individual can bring about, and -- once established -- no one can be excluded from the enjoyment of these goods.  (Public choice theorists sometimes look at other kinds of non-private goods such as "club goods"; see Dennis Mueller, Perspectives on Public Choice: A Handbook.)

Further, some outcomes may in fact be private goods, but may be such that they require coordinated efforts by multiple individuals to achieve them efficiently. An example of this is traditional farming: it may be that the yield on one individual's plot is greater if a group of neighbors provide concentrated labor on weeding this plot today and the neighbor's plot tomorrow than if each of us do all the weeding on our individual plots. The technical conditions surrounding traditional agriculture impose a cycle of labor demand that makes cooperation an efficient strategy.

This is where cooperation comes in. If a number of the members of a group agree to contribute our efforts to a common project we may find that the total results are greater -- for both common goods and private goods -- than if we had each pursued these goods through individual efforts. Cooperation can lead to improvement in the overall production of a good for a given level of sacrifice of time and effort.  This description uses the word "agree"; but Robert Axelrod (The Evolution of Cooperation) and David Lewis (Convention: A Philosophical Study) observe that many examples of cooperation depend on "convention" and tacit agreement rather than an explicit understanding among participants.

So cooperation can lead to better outcomes for a group and each individual in the group than would be achievable through entirely private efforts.

Cooperation should be distinguished from altruistic behavior; cooperation makes sense for rationally self-interested individuals if appropriate conditions are satisfied.  A cooperative arrangement can make everyone better off.  So we don't have to assume that individuals act altruistically in order to account for cooperation.

So why is cooperation not ubiquitous? It is in fact pretty widespread. But there are a couple of important obstacles to cooperation in ordinary social life: the rational incentive that exists to become a freerider or easy rider when the good in question is a public good; and the risk that cooperators run that the endeavor will fail because of non-contribution from other potential contributors. There is also often a timing problem: it is common for the contribution and the benefit to be separated in time, so contributors are even more concerned that they will be denied the benefits of cooperation. If Mr Wong is asked to weed today in consideration of assistance from Mr Li in harvesting the crop four months from now, he may be doubtful about the future benefit.

The basic logic of this situation has stimulated a mountain of great social science research and theory. Garrett Hardin's "tragedy of the commons" (Managing the Commons) and Mancur Olsen's The Logic of Collective Action: Public Goods and the Theory of Groups set the negative case for thinking that cooperation is all but impossible to sustain.  Elinor Ostrom's Nobel-prize winning work on common property resource regimes documents the ways in which communities have solved these cooperation dilemmas (Governing the Commons: The Evolution of Institutions for Collective Action). Douglas North essentially argues that only private property and binding contracts can do the job (The Rise of the Western World: A New Economic History). And Robert Axelrod has made the case for the rational basis of cooperation in The Evolution of Cooperation: Revised Edition. He argues that there are specific conditions that enhance or undermine cooperation and reciprocity; essentially, participants need to be able to reidentify each other over time and they need to have a high likelihood of continuing to interact with each other over an extended time. (His analysis is based on a series of experiments involving repeated prisoners' dilemmas.)

A market can "simulate" cooperation through enforceable contracts; so, for example, a peasant farming community could create a legally binding system of labor exchange among households.  And organizations can create quasi-binding agreements for cooperation through "memoranda of understanding" and "inter-governmental agreements" -- written agreements that may not be enforceable through legal remedies but nonetheless create a strong incentive for each party to fulfill the obligations of cooperation.  However, quite a bit of the opportunities for cooperation seem to fall outside the sphere of these formal and semi-formal mechanisms for binding agreements.

Informal cooperation needs some kind of institutional or normative setting that encourages compliance with the cooperative arrangement.  So there has been an energetic debate in the past twenty years over the feasibility of non-coercive solutions to cooperation problems; this is an area where the new institutionalism has played a key role.  And in the real world, we do in fact find numerous sustainable examples of informal cooperation.  Individuals work in community gardens; foundations join together in supporting urban renewal projects; villagers create labor-sharing practices.  But it is an interesting question to consider: are there institutional reforms that we could invent that would allow us as a society to capture more of the benefits of cooperation than we currently realize?

Cooperation

How important is cooperation in a market society?

First, what is cooperation? Suppose a number of individuals occupy a common social and geographical space. They have a variety of individual interests and things they value, and they have outcomes they'd like to bring about. Some of those outcomes are purely private goods, and some can be brought about through private activities by each individual.  These are the circumstances where private market-based activity can bring about socially optimal outcomes.

But some outcomes may look more like public or common goods -- for example, greater safety in the neighborhood or more sustainable uses of resources.  These are outcomes that no single individual can bring about, and -- once established -- no one can be excluded from the enjoyment of these goods.  (Public choice theorists sometimes look at other kinds of non-private goods such as "club goods"; see Dennis Mueller, Perspectives on Public Choice: A Handbook.)

Further, some outcomes may in fact be private goods, but may be such that they require coordinated efforts by multiple individuals to achieve them efficiently. An example of this is traditional farming: it may be that the yield on one individual's plot is greater if a group of neighbors provide concentrated labor on weeding this plot today and the neighbor's plot tomorrow than if each of us do all the weeding on our individual plots. The technical conditions surrounding traditional agriculture impose a cycle of labor demand that makes cooperation an efficient strategy.

This is where cooperation comes in. If a number of the members of a group agree to contribute our efforts to a common project we may find that the total results are greater -- for both common goods and private goods -- than if we had each pursued these goods through individual efforts. Cooperation can lead to improvement in the overall production of a good for a given level of sacrifice of time and effort.  This description uses the word "agree"; but Robert Axelrod (The Evolution of Cooperation) and David Lewis (Convention: A Philosophical Study) observe that many examples of cooperation depend on "convention" and tacit agreement rather than an explicit understanding among participants.

So cooperation can lead to better outcomes for a group and each individual in the group than would be achievable through entirely private efforts.

Cooperation should be distinguished from altruistic behavior; cooperation makes sense for rationally self-interested individuals if appropriate conditions are satisfied.  A cooperative arrangement can make everyone better off.  So we don't have to assume that individuals act altruistically in order to account for cooperation.

So why is cooperation not ubiquitous? It is in fact pretty widespread. But there are a couple of important obstacles to cooperation in ordinary social life: the rational incentive that exists to become a freerider or easy rider when the good in question is a public good; and the risk that cooperators run that the endeavor will fail because of non-contribution from other potential contributors. There is also often a timing problem: it is common for the contribution and the benefit to be separated in time, so contributors are even more concerned that they will be denied the benefits of cooperation. If Mr Wong is asked to weed today in consideration of assistance from Mr Li in harvesting the crop four months from now, he may be doubtful about the future benefit.

The basic logic of this situation has stimulated a mountain of great social science research and theory. Garrett Hardin's "tragedy of the commons" (Managing the Commons) and Mancur Olsen's The Logic of Collective Action: Public Goods and the Theory of Groups set the negative case for thinking that cooperation is all but impossible to sustain.  Elinor Ostrom's Nobel-prize winning work on common property resource regimes documents the ways in which communities have solved these cooperation dilemmas (Governing the Commons: The Evolution of Institutions for Collective Action). Douglas North essentially argues that only private property and binding contracts can do the job (The Rise of the Western World: A New Economic History). And Robert Axelrod has made the case for the rational basis of cooperation in The Evolution of Cooperation: Revised Edition. He argues that there are specific conditions that enhance or undermine cooperation and reciprocity; essentially, participants need to be able to reidentify each other over time and they need to have a high likelihood of continuing to interact with each other over an extended time. (His analysis is based on a series of experiments involving repeated prisoners' dilemmas.)

A market can "simulate" cooperation through enforceable contracts; so, for example, a peasant farming community could create a legally binding system of labor exchange among households.  And organizations can create quasi-binding agreements for cooperation through "memoranda of understanding" and "inter-governmental agreements" -- written agreements that may not be enforceable through legal remedies but nonetheless create a strong incentive for each party to fulfill the obligations of cooperation.  However, quite a bit of the opportunities for cooperation seem to fall outside the sphere of these formal and semi-formal mechanisms for binding agreements.

Informal cooperation needs some kind of institutional or normative setting that encourages compliance with the cooperative arrangement.  So there has been an energetic debate in the past twenty years over the feasibility of non-coercive solutions to cooperation problems; this is an area where the new institutionalism has played a key role.  And in the real world, we do in fact find numerous sustainable examples of informal cooperation.  Individuals work in community gardens; foundations join together in supporting urban renewal projects; villagers create labor-sharing practices.  But it is an interesting question to consider: are there institutional reforms that we could invent that would allow us as a society to capture more of the benefits of cooperation than we currently realize?

Hobbes an institutionalist?

Here is a surprising idea: of all the modern political philosophers, Thomas Hobbes comes closest to sharing the logic and worldview of modern social science. In Leviathan (1651) he sets out the problem of understanding the social world in terms that resemble a modern institutionalist and rational-choice approach to social explanation. It is a constructive approach, proceeding from reasoning about the constituents of society, to aggregative conclusions about the wholes that are constituted by these individuals. He puts forward a theory of agency -- how individuals reason and what their most basic motives are. Individuals are rational and self-concerned; they are strategic, in that they anticipate the likely behaviors of other agents; and they are risk-averse, in that they take steps to avoid attack by other agents. And he puts forward a description of two institutional settings within which social action takes place: the state of nature, where no "overawing" political institutions exist; and the sovereign state, where a single sovereign power imposes a set of laws regulating individuals' actions.

In the first institutional setting, he argues that individual competition in the context of the absence of sovereignty leads to perpetual violent competition. In the second institutional setting, he argues that individual self-striving within the context of a system of law leads to the accumulation of property and peaceful coexistence.

Here are some of Hobbes's premises about individual agents from chapter XIII of Leviathan:

From this equality of ability ariseth equality of hope in the attaining of our ends. And therefore if any two men desire the same thing, which nevertheless they cannot both enjoy, they become enemies; and in the way to their end (which is principally their own conservation, and sometimes their delectation only) endeavour to destroy or subdue one another. And from hence it comes to pass that where an invader hath no more to fear than another man's single power, if one plant, sow, build, or possess a convenient seat, others may probably be expected to come prepared with forces united to dispossess and deprive him, not only of the fruit of his labour, but also of his life or liberty. And the invader again is in the like danger of another.

So that in the nature of man, we find three principal causes of quarrel. First, competition; secondly, diffidence; thirdly, glory. The first maketh men invade for gain; the second, for safety; and the third, for reputation. The first use violence, to make themselves masters of other men's persons, wives, children, and cattle; the second, to defend them; the third, for trifles, as a word, a smile, a different opinion, and any other sign of undervalue, either direct in their persons or by reflection in their kindred, their friends, their nation, their profession, or their name.

The passions that incline men to peace are: fear of death; desire of such things as are necessary to commodious living; and a hope by their industry to obtain them. And reason suggesteth convenient articles of peace upon which men may be drawn to agreement. These articles are they which otherwise are called the laws of nature, whereof I shall speak more particularly in the two following chapters.

And these motives and forms of behavior by individuals lead to a predictable outcome for the collectivity in the state of nature: a war of all against all.

Whatsoever therefore is consequent to a time of war, where every man is enemy to every man, the same consequent to the time wherein men live without other security than what their own strength and their own invention shall furnish them withal. In such condition there is no place for industry, because the fruit thereof is uncertain: and consequently no culture of the earth; no navigation, nor use of the commodities that may be imported by sea; no commodious building; no instruments of moving and removing such things as require much force; no knowledge of the face of the earth; no account of time; no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.

This is an institutionalist argument. It models the behavior that is expected of a certain kind of agent within a certain kind of institutional setting; and it projects the consequences of these "microfoundations" for the aggregate society. In other words, Hobbes is offering a micro- to macro-argument based on analysis of modes of agency and assumptions about a particular institutional context.

Compare this logic with a description of the logic of social explanation offered by contemporary rational-choice social theorist James Coleman in Foundations of Social Theory:

A second mode of explanation of the behavior of social systems entails examining processes internal to the system, involving its component parts, or units at a level below that of the system. The prototypical case is that in which the component parts are individuals who are members of the social system. In other cases the component parts may be institutions within the system or subgroups that are part of the system. In all cases the analysis can be seen as moving to a lower level than that of the system, explaining the behavior of the system by recourse to the behavior of its parts. This mode of explanation is not uniquely quantitative or uniquely qualitative, but may be either. (2)

So the logic of Hobbes's argument is fairly clear; and it is deeply similar to that of institutionalist rational-choice theorists. Thomas Schelling's title, Micromotives and Macrobehavior, captures the idea in three words: derive descriptions of macro-level social arrangements and behavior from premises concerning individual-level motivation and action.

It is not a profound criticism of Hobbes's philosophical analysis to quarrel with Hobbes's specific assumptions about what is possible within the state of nature. And in fact, a number of contemporary political scientists argue that it is possible for men and women to create non-political institutions within the context of what Hobbes calls the state of nature. Coordination and cooperation are indeed possible within a "state of nature"; it is possible to achieve coordination within anarchy. From a sociological point of view, this is really a friendly amendment; it simply adds a further premise about the feasibility of certain kinds of cooperation. So the "cooperation within anarchy" criticism of Hobbes is advanced as a substantive argument about the feasibility of durable social institutions that do not depend upon a central coercive authority. And it depends upon several specific assumptions about the circumstances and mechanisms through which local groups of people can establish self-enforcing forms of cooperation that overcome free-riders and predatorial behavior. It is likely enough that Hobbes would not have been persuaded by this argument; but ultimately it is an empirical question.

Several arguments against Hobbes's conclusions about the state of nature are especially valuable from this point of view. First, I find Michael Taylor's arguments in Community, Anarchy and Liberty particularly convincing -- essentially, that peasant communities have traditionally found ways of creating and sustaining cooperative institutions and relationships that persist without the force of law to stabilize them. "Contracts" backed by legal systems are not the only way of establishing coordination and cooperation among independent agents. Robert Netting provides relevant examples in Smallholders, Householders: Farm Families and the Ecology of Intensive, Sustainable Agriculture, around traditional forms of labor-sharing and seasonal cooperation. And Elinor Ostrom and her collaborators make similar arguments in their historical and sociological studies of "common property resource regimes" -- essentially, stable patterns of cooperation maintained by local voluntary enforcement rather than central legislation (Governing the Commons: The Evolution of Institutions for Collective Action). Ostrom documents dozens of important historical cases where traditional communities have managed fisheries, forests, water resources, and other common properties without having a central state to support these patterns of cooperation and coordination.

But these are empirical and theoretical refinements to a fundamentally coherent model of social explanation that is full-fledged in Hobbes's work in the mid-seventeenth century: explain aggregate (macro) social outcomes as the result of mechanisms and actions at the level of individual actors.

Hobbes an institutionalist?

Here is a surprising idea: of all the modern political philosophers, Thomas Hobbes comes closest to sharing the logic and worldview of modern social science. In Leviathan (1651) he sets out the problem of understanding the social world in terms that resemble a modern institutionalist and rational-choice approach to social explanation. It is a constructive approach, proceeding from reasoning about the constituents of society, to aggregative conclusions about the wholes that are constituted by these individuals. He puts forward a theory of agency -- how individuals reason and what their most basic motives are. Individuals are rational and self-concerned; they are strategic, in that they anticipate the likely behaviors of other agents; and they are risk-averse, in that they take steps to avoid attack by other agents. And he puts forward a description of two institutional settings within which social action takes place: the state of nature, where no "overawing" political institutions exist; and the sovereign state, where a single sovereign power imposes a set of laws regulating individuals' actions.

In the first institutional setting, he argues that individual competition in the context of the absence of sovereignty leads to perpetual violent competition. In the second institutional setting, he argues that individual self-striving within the context of a system of law leads to the accumulation of property and peaceful coexistence.

Here are some of Hobbes's premises about individual agents from chapter XIII of Leviathan:

From this equality of ability ariseth equality of hope in the attaining of our ends. And therefore if any two men desire the same thing, which nevertheless they cannot both enjoy, they become enemies; and in the way to their end (which is principally their own conservation, and sometimes their delectation only) endeavour to destroy or subdue one another. And from hence it comes to pass that where an invader hath no more to fear than another man's single power, if one plant, sow, build, or possess a convenient seat, others may probably be expected to come prepared with forces united to dispossess and deprive him, not only of the fruit of his labour, but also of his life or liberty. And the invader again is in the like danger of another.

So that in the nature of man, we find three principal causes of quarrel. First, competition; secondly, diffidence; thirdly, glory. The first maketh men invade for gain; the second, for safety; and the third, for reputation. The first use violence, to make themselves masters of other men's persons, wives, children, and cattle; the second, to defend them; the third, for trifles, as a word, a smile, a different opinion, and any other sign of undervalue, either direct in their persons or by reflection in their kindred, their friends, their nation, their profession, or their name.

The passions that incline men to peace are: fear of death; desire of such things as are necessary to commodious living; and a hope by their industry to obtain them. And reason suggesteth convenient articles of peace upon which men may be drawn to agreement. These articles are they which otherwise are called the laws of nature, whereof I shall speak more particularly in the two following chapters.

And these motives and forms of behavior by individuals lead to a predictable outcome for the collectivity in the state of nature: a war of all against all.

Whatsoever therefore is consequent to a time of war, where every man is enemy to every man, the same consequent to the time wherein men live without other security than what their own strength and their own invention shall furnish them withal. In such condition there is no place for industry, because the fruit thereof is uncertain: and consequently no culture of the earth; no navigation, nor use of the commodities that may be imported by sea; no commodious building; no instruments of moving and removing such things as require much force; no knowledge of the face of the earth; no account of time; no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.

This is an institutionalist argument. It models the behavior that is expected of a certain kind of agent within a certain kind of institutional setting; and it projects the consequences of these "microfoundations" for the aggregate society. In other words, Hobbes is offering a micro- to macro-argument based on analysis of modes of agency and assumptions about a particular institutional context.

Compare this logic with a description of the logic of social explanation offered by contemporary rational-choice social theorist James Coleman in Foundations of Social Theory:

A second mode of explanation of the behavior of social systems entails examining processes internal to the system, involving its component parts, or units at a level below that of the system. The prototypical case is that in which the component parts are individuals who are members of the social system. In other cases the component parts may be institutions within the system or subgroups that are part of the system. In all cases the analysis can be seen as moving to a lower level than that of the system, explaining the behavior of the system by recourse to the behavior of its parts. This mode of explanation is not uniquely quantitative or uniquely qualitative, but may be either. (2)

So the logic of Hobbes's argument is fairly clear; and it is deeply similar to that of institutionalist rational-choice theorists. Thomas Schelling's title, Micromotives and Macrobehavior, captures the idea in three words: derive descriptions of macro-level social arrangements and behavior from premises concerning individual-level motivation and action.

It is not a profound criticism of Hobbes's philosophical analysis to quarrel with Hobbes's specific assumptions about what is possible within the state of nature. And in fact, a number of contemporary political scientists argue that it is possible for men and women to create non-political institutions within the context of what Hobbes calls the state of nature. Coordination and cooperation are indeed possible within a "state of nature"; it is possible to achieve coordination within anarchy. From a sociological point of view, this is really a friendly amendment; it simply adds a further premise about the feasibility of certain kinds of cooperation. So the "cooperation within anarchy" criticism of Hobbes is advanced as a substantive argument about the feasibility of durable social institutions that do not depend upon a central coercive authority. And it depends upon several specific assumptions about the circumstances and mechanisms through which local groups of people can establish self-enforcing forms of cooperation that overcome free-riders and predatorial behavior. It is likely enough that Hobbes would not have been persuaded by this argument; but ultimately it is an empirical question.

Several arguments against Hobbes's conclusions about the state of nature are especially valuable from this point of view. First, I find Michael Taylor's arguments in Community, Anarchy and Liberty particularly convincing -- essentially, that peasant communities have traditionally found ways of creating and sustaining cooperative institutions and relationships that persist without the force of law to stabilize them. "Contracts" backed by legal systems are not the only way of establishing coordination and cooperation among independent agents. Robert Netting provides relevant examples in Smallholders, Householders: Farm Families and the Ecology of Intensive, Sustainable Agriculture, around traditional forms of labor-sharing and seasonal cooperation. And Elinor Ostrom and her collaborators make similar arguments in their historical and sociological studies of "common property resource regimes" -- essentially, stable patterns of cooperation maintained by local voluntary enforcement rather than central legislation (Governing the Commons: The Evolution of Institutions for Collective Action). Ostrom documents dozens of important historical cases where traditional communities have managed fisheries, forests, water resources, and other common properties without having a central state to support these patterns of cooperation and coordination.

But these are empirical and theoretical refinements to a fundamentally coherent model of social explanation that is full-fledged in Hobbes's work in the mid-seventeenth century: explain aggregate (macro) social outcomes as the result of mechanisms and actions at the level of individual actors.

Hobbes an institutionalist?

Here is a surprising idea: of all the modern political philosophers, Thomas Hobbes comes closest to sharing the logic and worldview of modern social science. In Leviathan (1651) he sets out the problem of understanding the social world in terms that resemble a modern institutionalist and rational-choice approach to social explanation. It is a constructive approach, proceeding from reasoning about the constituents of society, to aggregative conclusions about the wholes that are constituted by these individuals. He puts forward a theory of agency -- how individuals reason and what their most basic motives are. Individuals are rational and self-concerned; they are strategic, in that they anticipate the likely behaviors of other agents; and they are risk-averse, in that they take steps to avoid attack by other agents. And he puts forward a description of two institutional settings within which social action takes place: the state of nature, where no "overawing" political institutions exist; and the sovereign state, where a single sovereign power imposes a set of laws regulating individuals' actions.

In the first institutional setting, he argues that individual competition in the context of the absence of sovereignty leads to perpetual violent competition. In the second institutional setting, he argues that individual self-striving within the context of a system of law leads to the accumulation of property and peaceful coexistence.

Here are some of Hobbes's premises about individual agents from chapter XIII of Leviathan:

From this equality of ability ariseth equality of hope in the attaining of our ends. And therefore if any two men desire the same thing, which nevertheless they cannot both enjoy, they become enemies; and in the way to their end (which is principally their own conservation, and sometimes their delectation only) endeavour to destroy or subdue one another. And from hence it comes to pass that where an invader hath no more to fear than another man's single power, if one plant, sow, build, or possess a convenient seat, others may probably be expected to come prepared with forces united to dispossess and deprive him, not only of the fruit of his labour, but also of his life or liberty. And the invader again is in the like danger of another.

So that in the nature of man, we find three principal causes of quarrel. First, competition; secondly, diffidence; thirdly, glory. The first maketh men invade for gain; the second, for safety; and the third, for reputation. The first use violence, to make themselves masters of other men's persons, wives, children, and cattle; the second, to defend them; the third, for trifles, as a word, a smile, a different opinion, and any other sign of undervalue, either direct in their persons or by reflection in their kindred, their friends, their nation, their profession, or their name.

The passions that incline men to peace are: fear of death; desire of such things as are necessary to commodious living; and a hope by their industry to obtain them. And reason suggesteth convenient articles of peace upon which men may be drawn to agreement. These articles are they which otherwise are called the laws of nature, whereof I shall speak more particularly in the two following chapters.

And these motives and forms of behavior by individuals lead to a predictable outcome for the collectivity in the state of nature: a war of all against all.

Whatsoever therefore is consequent to a time of war, where every man is enemy to every man, the same consequent to the time wherein men live without other security than what their own strength and their own invention shall furnish them withal. In such condition there is no place for industry, because the fruit thereof is uncertain: and consequently no culture of the earth; no navigation, nor use of the commodities that may be imported by sea; no commodious building; no instruments of moving and removing such things as require much force; no knowledge of the face of the earth; no account of time; no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.

This is an institutionalist argument. It models the behavior that is expected of a certain kind of agent within a certain kind of institutional setting; and it projects the consequences of these "microfoundations" for the aggregate society. In other words, Hobbes is offering a micro- to macro-argument based on analysis of modes of agency and assumptions about a particular institutional context.

Compare this logic with a description of the logic of social explanation offered by contemporary rational-choice social theorist James Coleman in Foundations of Social Theory:

A second mode of explanation of the behavior of social systems entails examining processes internal to the system, involving its component parts, or units at a level below that of the system. The prototypical case is that in which the component parts are individuals who are members of the social system. In other cases the component parts may be institutions within the system or subgroups that are part of the system. In all cases the analysis can be seen as moving to a lower level than that of the system, explaining the behavior of the system by recourse to the behavior of its parts. This mode of explanation is not uniquely quantitative or uniquely qualitative, but may be either. (2)

So the logic of Hobbes's argument is fairly clear; and it is deeply similar to that of institutionalist rational-choice theorists. Thomas Schelling's title, Micromotives and Macrobehavior, captures the idea in three words: derive descriptions of macro-level social arrangements and behavior from premises concerning individual-level motivation and action.

It is not a profound criticism of Hobbes's philosophical analysis to quarrel with Hobbes's specific assumptions about what is possible within the state of nature. And in fact, a number of contemporary political scientists argue that it is possible for men and women to create non-political institutions within the context of what Hobbes calls the state of nature. Coordination and cooperation are indeed possible within a "state of nature"; it is possible to achieve coordination within anarchy. From a sociological point of view, this is really a friendly amendment; it simply adds a further premise about the feasibility of certain kinds of cooperation. So the "cooperation within anarchy" criticism of Hobbes is advanced as a substantive argument about the feasibility of durable social institutions that do not depend upon a central coercive authority. And it depends upon several specific assumptions about the circumstances and mechanisms through which local groups of people can establish self-enforcing forms of cooperation that overcome free-riders and predatorial behavior. It is likely enough that Hobbes would not have been persuaded by this argument; but ultimately it is an empirical question.

Several arguments against Hobbes's conclusions about the state of nature are especially valuable from this point of view. First, I find Michael Taylor's arguments in Community, Anarchy and Liberty particularly convincing -- essentially, that peasant communities have traditionally found ways of creating and sustaining cooperative institutions and relationships that persist without the force of law to stabilize them. "Contracts" backed by legal systems are not the only way of establishing coordination and cooperation among independent agents. Robert Netting provides relevant examples in Smallholders, Householders: Farm Families and the Ecology of Intensive, Sustainable Agriculture, around traditional forms of labor-sharing and seasonal cooperation. And Elinor Ostrom and her collaborators make similar arguments in their historical and sociological studies of "common property resource regimes" -- essentially, stable patterns of cooperation maintained by local voluntary enforcement rather than central legislation (Governing the Commons: The Evolution of Institutions for Collective Action). Ostrom documents dozens of important historical cases where traditional communities have managed fisheries, forests, water resources, and other common properties without having a central state to support these patterns of cooperation and coordination.

But these are empirical and theoretical refinements to a fundamentally coherent model of social explanation that is full-fledged in Hobbes's work in the mid-seventeenth century: explain aggregate (macro) social outcomes as the result of mechanisms and actions at the level of individual actors.

Cooperatives within markets

In a recent post on ChangingSociety I considered the question whether households in a rural community might be able to achieve energy self-sufficiency based on the cultivation of crops such as cattails and community production of ethanol. One question raised there is whether it is possible to estimate the land and labor that would be required for household self-sufficiency, and the other is whether we might describe an economically feasible distillery cooperative system that would permit a hundred families to distill their product. Based on assumptions that are drawn from a number of sources out of a very complicated domain of knowledge about the economics of ethanol, I put together several scenarios to see what the lifestyle consequences would be for "fuel farmers". A scenario based on moderate assumptions yielded these results: in order to produce a household stock of fuel of 2,400 gallons of ethanol, a household would need to cultivate 10 acres of cattails and would need to expend 4 hours per day year round on cultivation, harvesting, and distillery coop duties.

What I'd like to focus on in this posting is the feasibility and characteristics of cooperatives as a way for small- and medium-sized communities to handle some of the key material activities they need to accomplish. In a modern society we are so accustomed to market mechanisms and individual decision-making that it is somewhat difficult to imagine how coops might work in modern circumstances. So, for the example under consideration here, the market scenario is straightforward: farmers grow cattails to serve as a raw material for a privately owned distillery; the price of the cattails is eventually determined as a function of the quantity and value of the final products of distillation (ethanol and feed); and cattail farming is simply another crop within the private farmer's portfolio. And if the business case for a privately developed distillery is favorable -- that is, the raw materials will be available in sufficient quantity and low price and the value of the product will be sufficient to provide a profit -- then entrepreneurs will emerge to fill this economic niche. Everyone's interests are satisfied: farmers earn more income, private owners earn a profit, and society is presented with a growing volume of renewable fuels.

But consider the downside of this market-based story from the fuel farmers' point of view. They have no control over the price that their cattail crop will bring; they are subject to the vagaries of commodity prices and the semi-monopoly position held by the local distillery; and they are likely to believe that the "middle man" is taking too much of their crop and labor in the form of profits. And, after all, the farmers' interest is in achieving a sustainable energy supply -- not simply a level of income consistent with the budget necessities of everyday life. They're growing the cattails because they are a source of energy that can be produced and consumed separately from the market. So passing through the market twice -- selling the raw materials and purchasing ethanol -- seems like an unnecessary and risky detour; why not simply turn the crop into ethanol directly without passing through the marketplace?

So the fuel farmer has an interest in directly capturing the energy content of the crop, not simply growing another kind of cash crop. This could be done by establishing a farm still and processing the crop directly; but there are significant economies of scale in distillation, so this is not an ideal solution. An inefficient distillation process simply means that the farmer must farm a larger area and expend more labor in order to arrive at the net quantity of fuel required. A better solution would result from sharing the distillation process among an extended group of households and maintaining a small to medium-sized distillery for the use of the community. So we might imagine leaders coming forward who propose the establishment of a cooperative distillery. Coop members would share costs, labor time, and ethanol based on the volume of feedstock that they provide to the process. If all households were farming roughly the same amount of land at the same level of intensity, then all households would contribute cash and labor equally and would "earn" the same quantity of ethanol from the process.

So now let's do a little bit of scenario building. Suppose there is a turnkey distillery operation that can be purchased for $2 million, with a well-documented set of technical efficiency characteristics. (That way prospective coop members know what they're getting into.) The distillery processes 60,000 pounds of biomass a day and produces about 2,000 gallons of ethanol. The distillation process requires 30 hours of labor per day. And this scale of production is about right for the needs of a cooperative involving 100 households. Members are required to accept joint financial responsibility for debt and operations of the coop, and they are required to provide their full share of coop labor at the distillery based on a schedule of work times. And, given the technical characteristics of farming and distilling, they can be confident that their fuel farming labor will result in a quantity of biomass that will entitle them to 2,400 gallons of ethanol annually. On a plausible set of assumptions, this means that each household will have coop dues of $2,200 and a monthly labor obligation of 6 hours.

So far, so good; this sounds like a good deal for each of the households. Each household satisfies its annual energy needs with an investment of $2,200 in cash and about 1,000 hours of labor expended on cultivation, harvesting, transporting, and distilling; whereas the cost of purchasing this volume of ethanol would be about $10,000. So what obstacles might arise in implementing this cooperative solution to the problem of energy self-sufficiency?

There are several predictable challenges that this scenario is likely to raise, including especially in the areas of governance, technical management, work management, accounting, trust, taxation, and sustainability over time.

• Governance. The cooperative needs to make decisions about management, maintenance, and improvement of the facility. How should this be done? Are all decisions to be taken on the basis of a vote by the membership? Should there be an executive committee with some powers of decision-making? Is there an executive manager? How will conflicts among coop members be managed and resolved?
  
• Technical management. The distillery is technically complex. Maintenance requires skilled technicians or millwrights. Can the coop count on these kinds of expertise among its membership? Will it need to hire outside experts and engineers to maintain the facility? Who will take responsibility for maintaining safety processes and standards within the facility?
  
• Work management. Who will supervise the work of coop members while they are performing their tasks during coop labor? Is there a likelihood of "easy riding" -- coop members who bring their blackberries to work and keep checking their email rather than cleaning the boiler? What kinds of discipline processes are feasible within a coop -- for example, fines imposed on "no-show" workers? Will the coop need to reward internal experts with a somewhat larger share of the product?
• Accounting. There is a very substantial amount of accounting of inputs and outputs that needs to be accomplished. As coop members pull up with a load of biofuel the quantity and quality needs to be measured and recorded. Clear formulas governing the pay-out of ethanol need to be codified. There is a time lag between depositing the feedstock and withdrawing the ethanol; rules need to be established that govern the household's entitlement to a given quantity of ethanol on a regular basis (weekly, monthly, quarterly?).
  
• Trust. Members need to have a substantial level of trust in each other and in the non-professional managers of the process. Theft of assets is always a possibility by managers. Fraud on the part of coop members is also possible -- for example, mixing non-feedstock materials into a load of feedstock and taking credit for 6,000 pounds rather than 5,500 pounds of stock. More careful inspection procedures have a cost -- more labor time from the membership. Members need to be confident that other members will continue to pay their dues -- otherwise the debt obligations of the coop fall on a smaller and smaller circle of dues-payers.
• Taxation. The cooperative is likely to face expanding demand for improvements of the facility, the technology, or the use of labor. This means raising the obligations imposed on coop members, in the form of coop dues, a percentage of their ethanol share, or an increase in labor time required by coop members. How will these increases in assessment be decided?
  
• Sustainability over time. The economics of the cooperative distillery depend on a certain size of membership -- say 100 households. Like any human organization, there will be exits from the cooperative -- retirements, relocation, discouragement. Will the cooperative be able to continually recruit new members in sufficient numbers to keep the process in the black? Is there the risk of the "dying seminar" that Thomas Schelling writes about -- decline leading to rising costs for the remaining members, leading to further decline in membership (Micromotives and Macrobehavior)?
  

So -- there are significant challenges of governance, management, and trust that stand in the way of a successful cooperative. This doesn't mean that cooperatives are impossible to create or sustain, or that they don't have significant economic advantages for their members. But perhaps it does explain why this is not a common solution so far in modern social settings as a way of securing coordination and shared economic benefits among a mid-sized group of persons or households. At the same time, it seems very worthwhile to expend effort on trying to resolve these issues in ways that make cooperative arrangements more feasible and sustainable than they currently are in modern society.

Cooperatives within markets

In a recent post on ChangingSociety I considered the question whether households in a rural community might be able to achieve energy self-sufficiency based on the cultivation of crops such as cattails and community production of ethanol. One question raised there is whether it is possible to estimate the land and labor that would be required for household self-sufficiency, and the other is whether we might describe an economically feasible distillery cooperative system that would permit a hundred families to distill their product. Based on assumptions that are drawn from a number of sources out of a very complicated domain of knowledge about the economics of ethanol, I put together several scenarios to see what the lifestyle consequences would be for "fuel farmers". A scenario based on moderate assumptions yielded these results: in order to produce a household stock of fuel of 2,400 gallons of ethanol, a household would need to cultivate 10 acres of cattails and would need to expend 4 hours per day year round on cultivation, harvesting, and distillery coop duties.

What I'd like to focus on in this posting is the feasibility and characteristics of cooperatives as a way for small- and medium-sized communities to handle some of the key material activities they need to accomplish. In a modern society we are so accustomed to market mechanisms and individual decision-making that it is somewhat difficult to imagine how coops might work in modern circumstances. So, for the example under consideration here, the market scenario is straightforward: farmers grow cattails to serve as a raw material for a privately owned distillery; the price of the cattails is eventually determined as a function of the quantity and value of the final products of distillation (ethanol and feed); and cattail farming is simply another crop within the private farmer's portfolio. And if the business case for a privately developed distillery is favorable -- that is, the raw materials will be available in sufficient quantity and low price and the value of the product will be sufficient to provide a profit -- then entrepreneurs will emerge to fill this economic niche. Everyone's interests are satisfied: farmers earn more income, private owners earn a profit, and society is presented with a growing volume of renewable fuels.

But consider the downside of this market-based story from the fuel farmers' point of view. They have no control over the price that their cattail crop will bring; they are subject to the vagaries of commodity prices and the semi-monopoly position held by the local distillery; and they are likely to believe that the "middle man" is taking too much of their crop and labor in the form of profits. And, after all, the farmers' interest is in achieving a sustainable energy supply -- not simply a level of income consistent with the budget necessities of everyday life. They're growing the cattails because they are a source of energy that can be produced and consumed separately from the market. So passing through the market twice -- selling the raw materials and purchasing ethanol -- seems like an unnecessary and risky detour; why not simply turn the crop into ethanol directly without passing through the marketplace?

So the fuel farmer has an interest in directly capturing the energy content of the crop, not simply growing another kind of cash crop. This could be done by establishing a farm still and processing the crop directly; but there are significant economies of scale in distillation, so this is not an ideal solution. An inefficient distillation process simply means that the farmer must farm a larger area and expend more labor in order to arrive at the net quantity of fuel required. A better solution would result from sharing the distillation process among an extended group of households and maintaining a small to medium-sized distillery for the use of the community. So we might imagine leaders coming forward who propose the establishment of a cooperative distillery. Coop members would share costs, labor time, and ethanol based on the volume of feedstock that they provide to the process. If all households were farming roughly the same amount of land at the same level of intensity, then all households would contribute cash and labor equally and would "earn" the same quantity of ethanol from the process.

So now let's do a little bit of scenario building. Suppose there is a turnkey distillery operation that can be purchased for $2 million, with a well-documented set of technical efficiency characteristics. (That way prospective coop members know what they're getting into.) The distillery processes 60,000 pounds of biomass a day and produces about 2,000 gallons of ethanol. The distillation process requires 30 hours of labor per day. And this scale of production is about right for the needs of a cooperative involving 100 households. Members are required to accept joint financial responsibility for debt and operations of the coop, and they are required to provide their full share of coop labor at the distillery based on a schedule of work times. And, given the technical characteristics of farming and distilling, they can be confident that their fuel farming labor will result in a quantity of biomass that will entitle them to 2,400 gallons of ethanol annually. On a plausible set of assumptions, this means that each household will have coop dues of $2,200 and a monthly labor obligation of 6 hours.

So far, so good; this sounds like a good deal for each of the households. Each household satisfies its annual energy needs with an investment of $2,200 in cash and about 1,000 hours of labor expended on cultivation, harvesting, transporting, and distilling; whereas the cost of purchasing this volume of ethanol would be about $10,000. So what obstacles might arise in implementing this cooperative solution to the problem of energy self-sufficiency?

There are several predictable challenges that this scenario is likely to raise, including especially in the areas of governance, technical management, work management, accounting, trust, taxation, and sustainability over time.

• Governance. The cooperative needs to make decisions about management, maintenance, and improvement of the facility. How should this be done? Are all decisions to be taken on the basis of a vote by the membership? Should there be an executive committee with some powers of decision-making? Is there an executive manager? How will conflicts among coop members be managed and resolved?
  
• Technical management. The distillery is technically complex. Maintenance requires skilled technicians or millwrights. Can the coop count on these kinds of expertise among its membership? Will it need to hire outside experts and engineers to maintain the facility? Who will take responsibility for maintaining safety processes and standards within the facility?
  
• Work management. Who will supervise the work of coop members while they are performing their tasks during coop labor? Is there a likelihood of "easy riding" -- coop members who bring their blackberries to work and keep checking their email rather than cleaning the boiler? What kinds of discipline processes are feasible within a coop -- for example, fines imposed on "no-show" workers? Will the coop need to reward internal experts with a somewhat larger share of the product?
• Accounting. There is a very substantial amount of accounting of inputs and outputs that needs to be accomplished. As coop members pull up with a load of biofuel the quantity and quality needs to be measured and recorded. Clear formulas governing the pay-out of ethanol need to be codified. There is a time lag between depositing the feedstock and withdrawing the ethanol; rules need to be established that govern the household's entitlement to a given quantity of ethanol on a regular basis (weekly, monthly, quarterly?).
  
• Trust. Members need to have a substantial level of trust in each other and in the non-professional managers of the process. Theft of assets is always a possibility by managers. Fraud on the part of coop members is also possible -- for example, mixing non-feedstock materials into a load of feedstock and taking credit for 6,000 pounds rather than 5,500 pounds of stock. More careful inspection procedures have a cost -- more labor time from the membership. Members need to be confident that other members will continue to pay their dues -- otherwise the debt obligations of the coop fall on a smaller and smaller circle of dues-payers.
• Taxation. The cooperative is likely to face expanding demand for improvements of the facility, the technology, or the use of labor. This means raising the obligations imposed on coop members, in the form of coop dues, a percentage of their ethanol share, or an increase in labor time required by coop members. How will these increases in assessment be decided?
  
• Sustainability over time. The economics of the cooperative distillery depend on a certain size of membership -- say 100 households. Like any human organization, there will be exits from the cooperative -- retirements, relocation, discouragement. Will the cooperative be able to continually recruit new members in sufficient numbers to keep the process in the black? Is there the risk of the "dying seminar" that Thomas Schelling writes about -- decline leading to rising costs for the remaining members, leading to further decline in membership (Micromotives and Macrobehavior)?
  

So -- there are significant challenges of governance, management, and trust that stand in the way of a successful cooperative. This doesn't mean that cooperatives are impossible to create or sustain, or that they don't have significant economic advantages for their members. But perhaps it does explain why this is not a common solution so far in modern social settings as a way of securing coordination and shared economic benefits among a mid-sized group of persons or households. At the same time, it seems very worthwhile to expend effort on trying to resolve these issues in ways that make cooperative arrangements more feasible and sustainable than they currently are in modern society.

Cooperatives within markets

In a recent post on ChangingSociety I considered the question whether households in a rural community might be able to achieve energy self-sufficiency based on the cultivation of crops such as cattails and community production of ethanol. One question raised there is whether it is possible to estimate the land and labor that would be required for household self-sufficiency, and the other is whether we might describe an economically feasible distillery cooperative system that would permit a hundred families to distill their product. Based on assumptions that are drawn from a number of sources out of a very complicated domain of knowledge about the economics of ethanol, I put together several scenarios to see what the lifestyle consequences would be for "fuel farmers". A scenario based on moderate assumptions yielded these results: in order to produce a household stock of fuel of 2,400 gallons of ethanol, a household would need to cultivate 10 acres of cattails and would need to expend 4 hours per day year round on cultivation, harvesting, and distillery coop duties.

What I'd like to focus on in this posting is the feasibility and characteristics of cooperatives as a way for small- and medium-sized communities to handle some of the key material activities they need to accomplish. In a modern society we are so accustomed to market mechanisms and individual decision-making that it is somewhat difficult to imagine how coops might work in modern circumstances. So, for the example under consideration here, the market scenario is straightforward: farmers grow cattails to serve as a raw material for a privately owned distillery; the price of the cattails is eventually determined as a function of the quantity and value of the final products of distillation (ethanol and feed); and cattail farming is simply another crop within the private farmer's portfolio. And if the business case for a privately developed distillery is favorable -- that is, the raw materials will be available in sufficient quantity and low price and the value of the product will be sufficient to provide a profit -- then entrepreneurs will emerge to fill this economic niche. Everyone's interests are satisfied: farmers earn more income, private owners earn a profit, and society is presented with a growing volume of renewable fuels.

But consider the downside of this market-based story from the fuel farmers' point of view. They have no control over the price that their cattail crop will bring; they are subject to the vagaries of commodity prices and the semi-monopoly position held by the local distillery; and they are likely to believe that the "middle man" is taking too much of their crop and labor in the form of profits. And, after all, the farmers' interest is in achieving a sustainable energy supply -- not simply a level of income consistent with the budget necessities of everyday life. They're growing the cattails because they are a source of energy that can be produced and consumed separately from the market. So passing through the market twice -- selling the raw materials and purchasing ethanol -- seems like an unnecessary and risky detour; why not simply turn the crop into ethanol directly without passing through the marketplace?

So the fuel farmer has an interest in directly capturing the energy content of the crop, not simply growing another kind of cash crop. This could be done by establishing a farm still and processing the crop directly; but there are significant economies of scale in distillation, so this is not an ideal solution. An inefficient distillation process simply means that the farmer must farm a larger area and expend more labor in order to arrive at the net quantity of fuel required. A better solution would result from sharing the distillation process among an extended group of households and maintaining a small to medium-sized distillery for the use of the community. So we might imagine leaders coming forward who propose the establishment of a cooperative distillery. Coop members would share costs, labor time, and ethanol based on the volume of feedstock that they provide to the process. If all households were farming roughly the same amount of land at the same level of intensity, then all households would contribute cash and labor equally and would "earn" the same quantity of ethanol from the process.

So now let's do a little bit of scenario building. Suppose there is a turnkey distillery operation that can be purchased for $2 million, with a well-documented set of technical efficiency characteristics. (That way prospective coop members know what they're getting into.) The distillery processes 60,000 pounds of biomass a day and produces about 2,000 gallons of ethanol. The distillation process requires 30 hours of labor per day. And this scale of production is about right for the needs of a cooperative involving 100 households. Members are required to accept joint financial responsibility for debt and operations of the coop, and they are required to provide their full share of coop labor at the distillery based on a schedule of work times. And, given the technical characteristics of farming and distilling, they can be confident that their fuel farming labor will result in a quantity of biomass that will entitle them to 2,400 gallons of ethanol annually. On a plausible set of assumptions, this means that each household will have coop dues of $2,200 and a monthly labor obligation of 6 hours.

So far, so good; this sounds like a good deal for each of the households. Each household satisfies its annual energy needs with an investment of $2,200 in cash and about 1,000 hours of labor expended on cultivation, harvesting, transporting, and distilling; whereas the cost of purchasing this volume of ethanol would be about $10,000. So what obstacles might arise in implementing this cooperative solution to the problem of energy self-sufficiency?

There are several predictable challenges that this scenario is likely to raise, including especially in the areas of governance, technical management, work management, accounting, trust, taxation, and sustainability over time.

• Governance. The cooperative needs to make decisions about management, maintenance, and improvement of the facility. How should this be done? Are all decisions to be taken on the basis of a vote by the membership? Should there be an executive committee with some powers of decision-making? Is there an executive manager? How will conflicts among coop members be managed and resolved?
  
• Technical management. The distillery is technically complex. Maintenance requires skilled technicians or millwrights. Can the coop count on these kinds of expertise among its membership? Will it need to hire outside experts and engineers to maintain the facility? Who will take responsibility for maintaining safety processes and standards within the facility?
  
• Work management. Who will supervise the work of coop members while they are performing their tasks during coop labor? Is there a likelihood of "easy riding" -- coop members who bring their blackberries to work and keep checking their email rather than cleaning the boiler? What kinds of discipline processes are feasible within a coop -- for example, fines imposed on "no-show" workers? Will the coop need to reward internal experts with a somewhat larger share of the product?
• Accounting. There is a very substantial amount of accounting of inputs and outputs that needs to be accomplished. As coop members pull up with a load of biofuel the quantity and quality needs to be measured and recorded. Clear formulas governing the pay-out of ethanol need to be codified. There is a time lag between depositing the feedstock and withdrawing the ethanol; rules need to be established that govern the household's entitlement to a given quantity of ethanol on a regular basis (weekly, monthly, quarterly?).
  
• Trust. Members need to have a substantial level of trust in each other and in the non-professional managers of the process. Theft of assets is always a possibility by managers. Fraud on the part of coop members is also possible -- for example, mixing non-feedstock materials into a load of feedstock and taking credit for 6,000 pounds rather than 5,500 pounds of stock. More careful inspection procedures have a cost -- more labor time from the membership. Members need to be confident that other members will continue to pay their dues -- otherwise the debt obligations of the coop fall on a smaller and smaller circle of dues-payers.
• Taxation. The cooperative is likely to face expanding demand for improvements of the facility, the technology, or the use of labor. This means raising the obligations imposed on coop members, in the form of coop dues, a percentage of their ethanol share, or an increase in labor time required by coop members. How will these increases in assessment be decided?
  
• Sustainability over time. The economics of the cooperative distillery depend on a certain size of membership -- say 100 households. Like any human organization, there will be exits from the cooperative -- retirements, relocation, discouragement. Will the cooperative be able to continually recruit new members in sufficient numbers to keep the process in the black? Is there the risk of the "dying seminar" that Thomas Schelling writes about -- decline leading to rising costs for the remaining members, leading to further decline in membership (Micromotives and Macrobehavior)?
  

So -- there are significant challenges of governance, management, and trust that stand in the way of a successful cooperative. This doesn't mean that cooperatives are impossible to create or sustain, or that they don't have significant economic advantages for their members. But perhaps it does explain why this is not a common solution so far in modern social settings as a way of securing coordination and shared economic benefits among a mid-sized group of persons or households. At the same time, it seems very worthwhile to expend effort on trying to resolve these issues in ways that make cooperative arrangements more feasible and sustainable than they currently are in modern society.