It is an EA proverb that people spend 80,000 hours of their life at work.[1] That's a lot of time where people could be happy and inventive, or miserable and unproductive. However, sixty percent of people reported being emotionally detached at work and 19% as being miserable. Only 33% reported feeling engaged. In the U.S. specifically, 50% of workers reported feeling stressed at their jobs on a daily basis, 41% as being worried, 22% as sad, and 18% angry.[2] This is not only terrible for the workers but also for the economy, since businesses with engaged workers have 23% higher profit, while employees who are not engaged cost the world $7.8 trillion in lost productivity, equal to 11% of global GDP.[3] Therefore, interventions that improve the workplace have the potential to alleviate a lot of misery.

When society went from hierarchical political structures to more democratic ones, it resulted in the populace gaining much more rights and liberties than before.[4] Yet in our everyday workplace we work in hierarchical structures that are much more authoritarian than we would ever accept from our government. If our governments tried to implement a system where the leaders had to face as little accountability to their underlings, while gaining as much monitoring and control as managers have, we would consider it a violation of our rights. While getting a job might be voluntary, everyone needs the resources and social status that jobs provide, so most people put up with the boring and repetitive work.[5]
There is an economic incentive for owners and managers to ensure the highest possible pay for themselves while establishing the lowest possible pay for their workers. Not to mention that employees don’t get a say in who gets hired or fired, despite it having a huge effect on their lives. No wonder then that employees don't trust their companies and 75% of employees say they quit their boss, not their job.[6]

Is there an alternative? Could we perhaps socialize the workplace? Would that improve employee welfare? Would those firms become less productive? Has this been successfully done before? Let's take a look at the literature.


What does it mean to socialize the workplace?

The idea is simple: Instead of the capitalist/owner of the firm deciding who manages the workers, the workers become part owner and get a say in how the firm is run. There are a couple ways this could be achieved but this post will primarily focus on one well-known example: worker cooperatives. Let's look at what the literature indicates as the benefits of socialist firms:

  1. Less inequality within firms[7]
  2. Less workers leaving the workplace[8] either voluntarily[9] or involuntarily[10]
  3. Workers put in more effort[11]
  4. Similar levels of productivity as conventional firms[12]
  5. Similar levels of investments as conventional firms[13]
  6. Workers report increased levels of trust[14]
  7. Lower rates of business failure[15]

There is also evidence that worker socialist firms pay their employees more than capitalist firms, but only in certain circumstances. I will return to this phenomenon later. I will not be looking at other types of cooperatives like consumer cooperatives, producer cooperatives and purchasing cooperatives. This limits the scope of the literature because while 800 million people are employed by cooperatives[16], only 100 million are employed by worker cooperatives.[17] When I use the word co-op in this post, assume I mean worker cooperative unless specified otherwise.


Do socialist firms work?

You might be asking yourself: Won't workers stop putting in as much effort into a collectively owned enterprise since the output is shared with their colleagues, which means they only get a small proportion of the fruits of their individual labor? According to the the free-rider hypothesis, rational and self-interested agents will always have an incentive to put in less effort and be a parasite of the efforts of others.[18] The business will inevitably go under as people realize that they will gain the most from shirking their responsibilities. The economist Amartya Sen once called the people depicted in these models "rational fools".

 In the case of the free rider hypothesis, these 'rational fools' act based on such a narrow conception of self-interest that they don't take into account the obviously damaging long-term consequences of their behavior, both to the firm and ultimately to themselves. Normal, reasonable people - who are different to rational economic man - are usually happy to put efforts into a collective endeavor that will deliver benefits for them in the long run, even if that means foregoing some short-term gains. Cooperation in worker democracies can be a challenge and a few people will try to free ride, but evidence illustrates this problem rarely becomes so bad it affects the performance of the workers and the firm [19] 

Experiments have shown that people randomly allocated to do tasks in groups where they can elect their leaders and/or choose their pay structures are more productive than those who are led by an unelected manager who makes pay choices for them.[20] One study looked at real firms with high levels of worker ownership of shares in the company and found that workers are keener to monitor others, making them more productive than those with low or no ownership of shares and directly contradicting the free rider hypothesis.[21] It turns out there are potential benefits to giving workers control and a stake in the running of the organization they work for. This allows workers to play a key role in decision making and reorient the goals of the organization.[22]

One explanation for this phenomenon is that of "localized knowledge". According to economist Friedrich Hayek, top-down organizers have difficulty harnessing and coordinating around local knowledge, and the policies they write that are the same across a wide range of circumstances don't account for the "particular circumstances of time and place".[23] (For examples of this, read Seeing Like a State by political scientist James Scott) Those who make the top-down policies in a traditional company are different to those who have to follow them. In addition, those who manage the company are most often different to those who own the company. These groups have different incentives and accumulate different knowledge. This means that co-ops have two main advantages:

  1. Workers can harness their collective knowledge to make running the firm more effective.
  2. Workers can use their voting power to ensure the organization is more aligned with their values.

Interestingly enough, I have yet to come across a co-op that uses the state of the art of social choice theory, so they could potentially get a lot lot better.


Potential problems with Co-ops

One potential problem with the literature on socialist firms is that it might be suffering from selection bias. In other words, they might not accurately represent the attributes of co-ops in general because the sample size is so small. For example: some sectors have more co-ops than others. One study found that socialist firms have a better survival rate than conventional firms in the service sector, but the same in other sectors.[24] Co-ops may disproportionally start in sectors where they are more likely to succeed.[25] and people who start co-ops tend to be more motivated than the average worker.[26]
It might be that if we force people to change their firm to a co-op they are less motivated to make it work. We should probably focus on making it easier for people to transition to- or start a new- co-op voluntarily.
One issue that arises with starting a socialist firms is acquiring initial investing.[27] This is probably because co-ops want to maximize income (wages), not profits. They pursue the interests of their members rather than investors and may sometimes opt to increase wages instead of profits. Capitalist firms on the other hand are explicitly investor owned so investor interests will take priority.
Many co-ops opt instead to rely on member contributions, which can be thousands of dollars. Economist and content-creator Unlearning economics describes the problem that arises:

If co-ops are set up in lower income communities they may have trouble obtaining financing, but if they exclude these communities then they're going to be a bit of a middle class thing excluding the people who arguably need them most.
The most obvious policy to help co-ops finance themselves would be direct grants and loans from local and national governments, as well as other financial incentives such as tax breaks, which play a big role in Uruguay. Not only could these be expanded, but the information about how to access them could be more widespread as currently what's available isn't always taken up. One example is the under-utilised Local Enterprise Assistance Fund or 'LEAF' in the USA, which offers credit to co-ops but gets few applications, even fewer of which are credible.

There are also a number of innovative ways people have got around the financing problem without direct state support. One option is to allow external shareholders who receive dividends but have partial or no voting rights, keeping the control in the hands of the workers. The successful US co-op Equal Exchange has provided these so-called Class B shareholders with annual dividends for more than 20 years. (The Class A Shareholders are the workers). In some cases financial institutions are also established as part of a concerted effort by a community to establish a democratic economy.[28]

Another avenue would be to get funding from credit unions, which are consumer co-ops. Having an economy with different types of co-ops could become crucial in making sure it can sustain itself longterm.[29] Co-ops tend to perform better with other co-ops around.[30] So it seems like starting a culture of socialist firm is hard, but once you get co-op leagues started it becomes easy to sustain.[31] Ex-youtuber Rose Wrist made an outline of some different types of co-ops:

  1. Complete Autonomous Cooperatives
    1. These firms operate with either direct or representative democracy
    2. These firms are completely owned by the workers at the firm
      1. No external shareholders
  2. Autonomous Cooperatives
    1. These firms operate with either direct or representative democracy
    2. These firms are majority owned by the workers at the firm
      1. External shareholder do not hold voting shares
  3. Majority Cooperatives
    1. These firms operate with either direct or representative democracy
    2. These firms are majority owned by the workers at the firm
      1. Some external shareholders may hold non-controlling voting shares
  4. ESOP (Employee Stock Ownership) Firms (Not a co-op)
    1. These firms may be operated in any way
    2. The workers at these firms all own some part of the company
      1. External shareholders may hold controlling voting shares

He identified some unconventional ways each of these could get funding[32]:


Are socialist firms good for employees?

One problem with modern firms that I already mentioned is how alienated employees are from their work. There's already a great post about how important meaning is in someone's life so I won't go into too much detail. Suffice to say that a better working environment would alleviate this problem.
Giving employees stock in a company seems to boost their performance.[33] Research has shown that employees getting more ownership of the company is associated with higher trust, perception of fairness, information sharing and cooperation.[34] There seems to be a small increase in companywide productivity[33], while employee retention is boosted.[35] Perhaps capitalist firms could slowly be eased into becoming socialist firms by first giving the employees more stakes in the company and then expanding their participation rights.

While the average employee makes more in a co-op, those at the top may earn less. Similarly, switching to a socialist firm gives the average employee higher pay, but not those at the top. This could potentially lead to a brain drain.[7] Even if we made every firm a co-op, there would still be inequality between firms, so top earners might shift to a couple of high paying co-ops. When there is an economic downturn socialist firms also tend to lower wages instead of firing people, which is once again great for the average worker but not for the top earners.[36] Volatile pay probably explains why some studies show that socialist firms pay less.[37] But while getting payed less in a recession still sucks, it is preferable to getting fired. This will also have a positive effect on the family members of employees, since they also suffer when said employees are fired.[38]


Conclusion and policies

Socialist firms are a powerful tool to improve the lives of the workforce. They reduce inequality within firms while maintaining similar (or even higher) levels of productivity as conventional firms. They improve the wage and mental health of the average worker while reducing the turnover rate. They are more resilient than conventional firms and make employees more connected with, and work harder for, their workplace.

They probably won't slow down the rise of global inequality since inequality between firms is still possible. Co-ops may also be more risk averse since the workers livelihoods are strongly tied to the performance of the firm, which might lead to less innovation. One way co-ops can still be bad for it's workers is if firms only hire workers for a short time and fire them before they get their vote. To prevent this governments will have to shore up their worker protection laws.

To incentivize the creation of socialist firms, governments can draft legislation to make it easier (and give tax incentives) for owners to turn their firm into a co-op. The government can also give loans to employees who want to buy firms from the owners or give preferential purchasing rights for employees of a firm that is facing closure/sale. These policies are good for co-ops because they bypass the difficulty of finding initial funding. The costs to the government can be recouped by lower mental healthcare costs and reduced need for government redistribution programs (especially during economic downturns). If the literature is correct and socialist firms are indeed more productive than capitalist firms it could also be seen as an investment into creating an economy that generates more tax revenue.

Once more co-ops get created it will also become easier to start cooperative leagues, which aid in the creation of new co-ops. Due to vertical integration they might also be able to counteract a brain drain. More importantly, they facilitate the acquisition of equity through economies of scale which gives cooperatives more capital to fall back on. This could mitigate or eliminate the (unproven) risk aversion of socialist firms.

Given the recent discussion surrounding the structuring and transparency of EA organizations, perhaps the community could consider turning their EA organizations into socialist firms. Not only would this grant all the advantages mentioned in this post, it would also have two additional advantages:

  1. It spreads the word about co-ops, making them less obscure in the collective consciousness
  2. It would allow us to study them closely which:
    1. Allows us to be able to draft more pointed legislation which can capitalize on their benefits while mitigating their limitations
    2. Allows us to find ways in which they can be improved



  1. ^
  2. ^
  3. ^
  4. ^
  5. ^
  6. ^
  7. ^
  8. ^
  9. ^
  10. ^

    The empirical performance of orthodox models of the firm: Conventional firms and worker cooperatives, Pencavel & Craig 

    New evidence on wages and employment in worker cooperatives compared with capitalist firms, Burdín & Dean 

  11. ^

    Employee Vs. Conventionally Owned and Controlled Firms: An Experimental Analysis, Frohlich et al 
    Workplace Democracy in the Lab, Mellizo et al 

  12. ^

    Productivity, Capital and Labor in Labor-Managed and Conventional Firms, FakhFakh et al 
    Are Cooperatives More Productive Than Investor-Owned Firms? Cross-Industry Evidence From Portugal, Monteiro & Straume 

  13. ^

    Shadow price of capital and the Furubotn–Pejovich effect: Some empirical evidence for Italian wine cooperatives, Maietta & Sena 
    Productivity, Capital and Labor in Labor-Managed and Conventional Firms, FakhFakh et al 

  14. ^

    Do cooperative enterprises create social trust?, Sabatini et al 

  15. ^

    Survival Rate of Co-operatives in Québec, OCA

    Co-op Survival Rates in Alberta, Stringham & Lee

    Co-op Survival Rates in British Columbia, Murray

    The Relative Survival of Worker Cooperatives and Barriers to Their Creation, Olsen

    Scale, Scope and Survival: A Comparison of Cooperative and Capitalist Modes of Production, Monteiro & Stewart 

  16. ^

    Trust, Inequality and The Size of The Co-Operative Sector: Cross-Country Evidence, Jones & Kalmi 

  17. ^

    Productivity in cooperatives and worker-owned enterprises, Logue & Yates 

  18. ^
  19. ^

    Employee Vs. Conventionally Owned and Controlled Firms: An Experimental Analysis, Frohlich et al 

  20. ^

    Workplace Democracy in the Lab, Mellizo et al 

  21. ^

    Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options, Kruse et al 

  22. ^

    Productivity, Capital and Labor in Labor-Managed and Conventional Firms, FakhFakh et al 
    Quote comes from this unlearning economics video, which was the basis for this blogpost.

  23. ^

    The Use of Knowledge in Society, Hayek

  24. ^
  25. ^

    Worker Cooperatives: Pathways to Scale, Abell

  26. ^
  27. ^

    Survival Rate of Co-operatives in Québec, OCA

  28. ^

    Worker Democracy, by Unlearning Economics this post could be seen as an adaptation of that video

  29. ^

    Productivity in cooperatives and worker-owned enterprises, Logue & Yates p20

  30. ^
  31. ^
  32. ^
  33. ^

    Employee ownership and firm performance: a meta-analysis, Boyle et al

  34. ^

    Do Broad-based Employee Ownership, Profit Sharing and Stock Options Help the Best Firms Do Even Better?, Blasi et al

    Causal linkages between work and life satisfaction and their determinants in a structural VAR approach Coad et al

  35. ^
  36. ^

    New evidence on wages and employment in worker cooperatives compared with capitalist firms, Burdín & Dean

  37. ^

    What do we really know about worker co-operatives?, Pérotin

  38. ^


In my experience, rationalists can be quite negative towards socialism (If you disagree with my assessment, or need some examples before you believe me, feel free to message me). I don't even blame the capitalists on this forum, it's the karma-systems fault.
Since there was an initial majority of capitalists they had an easier time accumulating voting power, while socialists were disproportionally downvoted. The same thing would have happened in reverse if the socialists had held the initial majority. To illustrate, let's get away from the tribal mindset and show that this is not even a politics thing.

Right now this is an English speaking forum and thus non-english posters/posts have more difficulty accumulating votes. This affects the people that are attracted to the forum, which increases the initial majority. Imagine what would have happened if the initial majority were Spanish speakers. It would probably have been a Spanish language forum with more references to Latin-American culture. The forum doesn't become Spanish because Spanish is a more rational language than English, it becomes Spanish because Spanish speakers get more votes on their posts which gives them more voting power which creates a feedback loop. (And that's without getting in-group biases involved)
If we want to counteract groupthink I propose we make the karma system more democratic. After all, isn't this forum kind of a workplace?


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74 comments, sorted by Click to highlight new comments since: Today at 4:32 AM
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If socialist workplaces actually had all those benefits, they would already be taking over much of the economy. But we don't see very many co-ops in the wild. My personal experience is that unions and co-ops tend to shift compensation to those with seniority and those involved with corporate politics instead of the skilled, productive, and competent ones. This then causes more time and energy to be spent on corporate politics and drives out the most productive employees. 

You're very much underestimating the effects of the top-performers at a business. The market has run the experiment of comparing socialist firms to capitalist ones for more than a century and every result has shown that socialist firms just aren't competitive. Yes, there are benefits to the less productive employees. But the cost of driving out the productives has been shown to be higher in just about every sector. Hence why there aren't very many socialist firms.

There's countries where cooperative firms are doing fine. Most of Denmark's supermarket chains are owned by the cooperative coop. Denmark's largest dairy producer Arla is a cooperative too. Both operate in a free market and are out-competing privately owned competitors.

Both also resort to many of the same dirty tricks traditionally structured firms are pulling. Arla, for example, has done tremendous harm to the plant-based industry through aggressive lobbying. Structuring firms as cooperatives doesn't magically make them aligned.

6Oskar Mathiasen4mo
Note that coop is a consumer cooperative not an employee cooperative. []   
Worth noting explicitly, the Danish government is in general much more hands-on in the economy than in most other countries. I don't know specifically how that manifests itself here, but I expect that's an important part of it
Most firms don't arise as the result of a group of people getting together with a blank slate as to how to.organise themselves; they start as one or two people who found a firm, which they continue to manage , hiring employees as they go along. Such firms are hierarchical because of the unequal status of the founders and hirelings, not because they are better ... and cooperatives are scarce because of the lack of a route to.them. I've seen this happen in capitalist corporations, too. In either case, the people who decide on compensation can increase their compensation with no regard to their own productivity. Indeed under capitalism, the owner 's right to profit is based solely on ownership, not on any input.
1B Jacobs4mo
I've already explained why socialists firms wouldn't necessarily take over the economy even if they were productive in both the post and other comments.

You indicated that there was a problem with me doing a spot check on something not directly related to co-ops, so let me instead do a spot check on something directly related to co-ops:

Let's look at what the literature indicates as the benefits of socialist firms:

[...] 3. Workers put in more effort[11]

I believe this is the cited study?

I'm confused about this study because the abstract seems to say that conventionally owned firms are better than co-ops:

In our experiments, subjects in conventionally-owned firms exhibited higher productivity, perceived greater fairness in the pay they received and the method used to pay them, reported higher levels of involvement in their tasks, had more positive evaluations of their supervisors, and showed a greater propensity to interact with and provide assistance to their co-workers than did those in employee-owned firms.

However, this seems to contradict table 3, where co-ops did better. So maybe they swapped around the labels in the abstract or something.

I'm also confused about what role the owner/supervisor was supposed to play in the work. It looks like the experimental simulation-company had workers do fairly independent tasks (spellchecking), and that there were not significant coordination or risk-management tasks for the owners to solve.

This is a well thought-out post with many citations and you've addressed a lot of valid points.

There are, however, a few fatal issues that really undermine the long-term viability of this kind of company.

To begin with, the fact that there are so few successful socialist firms is a really big deal that you can't simply hand-wave away. Yes, there might be a handful (dozen?) of co-op firms in the OECD that we can say are moderately 'successful' - but they are certainly the exception rather than the rule. If co-ops have all the advantages you clearly listed, then they will be the dominant form of enterprise.  But they're not. In no particular order:

Co-ops are quite incompatible with firm mobility. Somebody who has just joined the firm does not have the same ability to add-value, nor should they be afforded the same 'voting' right as a more experienced veteran. Very quickly, using any kind of practical measure, you can see that firm mobility and co-op equity quickly breaks down.

Funding becomes the next obvious point. At some point, all companies must raise funds. They have two choices: (1) Debt or (2) Equity. Many firms are capital intensive and simply will never be able to raise t... (read more)

Why is not the income from the business activity of the firm an option for the growth?
1David Duvenaud4mo
It is an option, but it only allows for relatively slow growth, and only for businesses that aren't capital-intensive.  So it's a good option for something like consulting firms or law firms, where there aren't really any up-front costs that need to be paid off over time. But imagine you invent a new type of power plant.  Many plants benefit from economies of scale, and also take 10-20 years to pay off their up-front construction costs.   How could a co-op finance building even a single plant?  Similar arguments apply to most forms of manufacturing, or really anything that can be mass-produced. Even in the case where organic growth is sustainable, it'll usually have to compete with much faster inorganic, financed growth.
A sufficiently large co-op could raise lot of money. For example, if you have 10 000 employees, and they democratically decide to invest $100 per person into a new project, you have $1M. Not enough for a power plant, but perhaps for something smaller. I think Mondragon Corporation does similar things. But this probably wouldn't feel sufficiently pure (ideologically) to many people. Imagine that you have a system of mutually connected co-ops with 1M employees total, and they decide to invest $1000 per person, and build an actual power plant. On one hand, you have a co-op-owned power plant, yay! On the other hand, the power plant itself is not actually owned (exclusively) by its own workers; it is mostly owned by co-op employees working in other businesses. Many people would feel that this is a mockery of their ideas; that the people working at the power plant do not have the true co-op-ness.
They could incrementally buy it back for "purity". Ends up being a kind of crowdsourcing.
Fast growth for growth sake expectations comes from jackpot seekers. I can see how loans are a justified way to get over that "first unit" hump. But if you have even a few actors like Uber that grow to big size fast and run at a loss, actors that prove their economic viability step by step can't really exist. Consumers end up having the product cheaper than it can be produced and loaners (or whoever ends up being the sucker in stock poker) end up paying for it. It seems very worrying if the "Does it make money?" is so fundamentally skippable that it is not worth considering. A worker that has found an activity they feel is meaningful and pays for their living is not in a big hurry to transmute it to another kind of activity, althought an attitude that a craft picked up should be developed exists.
1David Duvenaud4mo
The nice thing about loaners losing money on unprofitable businesses is that it's a self-correcting problem to some degree - those loaners can only lose all their money once!  And if consumers get part of that money, it's effectively a charity. Sometimes it seems like investors might not even consider whether their investments will make money, but most of the ones who last very long do care.

Oh, come on, the afterword ruined an otherwise great article!

I would love to learn more about co-ops. As far as I know, Mondragon Corporation is probably the biggest one, but there is frustratingly little information to find about them online.

What I heard about co-ops (no idea how generally this applies) is that if they grow, they often change to something else. Like, you have a worker-owned company with 100 workers, and one day they have an opportunity to grow 10× in size. And suddenly the original 100 workers are like: "wait, we spent decades working for this moment to happen, and now the new guys should be our equals? no way!", and the company finds a way to change itself in such way that the new 900 workers are mere workers, but not co-owners. (Perhaps the Mondragon Corporation is exceptional precisely for not doing this. They encourage new people joining their system; they even lend them money to start new branches within the system.)

The difficult part about starting a co-op is in my opinion simply the fact that people who have the skills necessary to start a co-op, can usually use the same skills to start a company that is fully owned by them.

Calling co-ops "socialist" means ... (read more)

I was also born in a former socialist country -Yugoslavia, which was notable for the prevalence of worker-managed firms [] in its economy. This made it somewhat unique among other socialist countries that used a more centralized approach with state ownership over entire industries.  While it is somewhat different than worker-owned cooperatives in modern market economies it does offer a useful data point. The general conclusion is that they work a bit better than a typical state-owned firm, but are still significantly worse in their economic performance compared to the median private company. This is the reason why despite having plenty of experience with worker-managed firms almost all ex-YU countries today have economies dominated by fully private companies and no one is really enthusiastic about repeating the worker-managed experiment.

You make a number of causal claims that seem to be empirically based. It would be nice if your post could expand on some details of how the causal inference was performed. For instance here:

This is not only terrible for the workers but also for the economy, since businesses with engaged workers have 23% higher profit, while employees who are not engaged cost the world $7.8 trillion in lost productivity, equal to 11% of global GDP.

What data and model are these estimates of the causal effects of it based on?

Another thing that confuses me is why socialist... (read more)

4B Jacobs4mo
You can find my sources in the references section. This was based on a gallup study [] I explained this in this section: A socialist firm can be more productive and not dominate the economy if it's hard to start a socialist firm.
The issue is basically friction. There were several things that made your links difficult to use: * They were not direct links to the study, but instead i direct links to articles that talk about the study, so I had to dig further manually. * The articles are often big and contain lots of specific things that might not be directly relevant to your point of using it in the post.  * Even having opened the study, I'm still left with confusions about the methodology. It looks to me like they basically just correlated employee engagement with productivity. This is valid if employee engagement varies in a way that is uncorrelated with other factors that have a big effect on productivity, but they don't seem to justify that assumption and it doesn't seem anecdotally sensible to me. Furthermore they suggest that managers have a huge effect on employee engagement, which seems to point to a potential area where this assumption could fail. I would like to see a factor analysis containing employee engagement and a bunch of other variables before I believe it to be reasonably independent of other factors. Now, these are questions I could study myself, so why put the burden on you? I'd say friction and scale: If everyone reading your article studies this themselves, then it is a lot of duplicated work. Meanwhile if you did the work, e.g. making sure to link directly instead of indirectly to the studies you've read, and making sure to also link to factor analyses demonstrating independence or whatever else is assumed, then the work would be only performed once, and the results of the work would be available to everyone reading the article. I'm not sure I understand the economics of this. If co-ops have an inherent massive growth advantage, wouldn't that outweigh the advantage capitalist firms have in giving more dividends to investors? Because while in the short term the capitalist firms would maybe give more to their investors, in the long t
It may be that this post would have been better if Ben had put a ton of extra effort into replacing links-to-links with links, and explaining everything in more detail. But this has a bit of an "isolated demand for rigor []" feel to me. To be clear, I don't mean that I have compared your response to this post with your response to otherwise-similar posts with a different political slant and found a difference; it is consistent with everything I think I know for you merely to be unusually rigor-demanding across the board. But it does feel to me as if (1) you're saying that to be good enough Ben's post should have gone to a lot more effort and (2) broadly similar posts with different political leanings don't generally attract demands for that level of author-effort.
More fundamentally the reason I call out that specific section is because I strongly doubt that the "businesses with engaged workers have 23% higher profit" sentence is based on statistics that are of any nontrivial evidentiary value for whether better workers lead to more profit, and if this part of the post is totally wrong then that calls into question whether the other statistics cited in the post are similarly totally wrong. However, in spot-checking whether the statistics were totally wrong, I found myself struggling with wading through signups and links and long mostly irrelevant articles. Of course some nonzero amount of this is likely to happen with spot-checks but it seemed like the layers of links just made it even worse. I was about to say that maybe I handled it wrong to begin with and should have just pointed out this problem. But looking back at my original comment I think I handled it right, in just asking OP to explain what data/model it was based on; the problem is that then OP responded back with repeating the links instead of explaining what he had read in the links. But I guess my followup response to OP responding back with repeating the links might be a problem.
1B Jacobs4mo
This is dishonest, the vast majority of the sources are primary scientific studies and the few times I do refer to secondary sources it isn't irrelevant. You did handle it right, especially your deleted comment. Yeah, because the primary source is right there?! What value would me explaining in my second language bring to the explanation, when you can click on the link and immediately download the primary source?
I wasn't talking about the vast majority of the sources, I was talking about source 3, which turned into source 2, which turned into some other source that I had to find myself. My deleted comment was nearly identical to one of the non-deleted comments. It's just that I realized there was a problem with one of my comments after posting it and I needed to take some time to look at it. The problem is that the primary source does not seem credible without additional information.
3B Jacobs4mo
A spot check is supposed to take a number of random sources and check them, not pick the one claim you find most suspicious (that isn't even about co-ops) and use that to dismiss the entire literature on co-ops.
There seem to be three parts to this objections: 1. I did not spot-check sufficiently many claims 2. I filtered the claim to spot-check based on being the most suspicious 3. I did not filter the claims based on being about co-ops With regards to point 1, I agree that I cannot know your accuracy very precisely without doing more checks, but the problem is that each check takes time and there are a lot of posts on the internet to read, so I have to limit how much I search. With regards to point 2, it's not that I spot-checked the most suspicious one, rather it's that I spot-checked the first suspicious one. This is still a filter on suspiciousness, but a much weaker one. I think some filter on suspiciousness is appropriate since suspicious claims are also the ones I can learn the most from if they turn out to be true, as claims become suspicious through a combination of being unlikely and having big implications. With regards to point 3, if you put much more effort into verifying the accuracy of your claims about co-ops than your claims about other stuff, then your accuracy on co-ops might not be that correlated with your accuracy on other stuff, and I ought to do a spot-check specifically on your claims about co-ops. I don't know if that is true. If it is true, it might also be helpful to mention it as a disclaimer in the post so people know what claims to mostly focus on. So it's not so much that I'm dismissing the entire literature on co-ops. (Or well, I would generally dismiss any social science that I haven't done some surface checks of. But that's different from my comments here.) It's more that I'm dismissing your literature review of the literature.
2B Jacobs4mo
It was the second source in the post: [2] There was a summary of it on the linked page itself:   From the study   I never claimed a massive growth advantage: As I said, the meta-analysis's only show a small growth advantage. If e.g a socialist firm grows with $1000 and a capitalist firm with $900, but the capitalist firm gives the $900 to the investors and the socialist firm gives $500 to both the investors and the employees, the investors can make more money with capitalist firms.  
Oh I think one confusing factor was the footnote placement. But anyway, no, this link doesn't link directly to the study either, it links to a report that links to the study. I had to go through additional links to find this document [] which appears to be the original source with the actual analysis. The wall of text doesn't really answer my questions about the independence of employee engagement. Ah sorry, that's my mixup between the effects of employee engagement vs effects of co-opts.
1B Jacobs4mo
You can immediately see a button that says "download report" when you click on that link. I wouldn't call that "digging for sources". It's not independent, co-ops let you vote on managers which allows productivity to increase. EDIT: I have apologized to (and thanked) tailcalled via messages, and have added the document as the third source. Once again, thanks for the suggestion.  
I have downloaded the report. When I searched for keywords from the sentence "This is not only terrible for the workers but also for the economy, since businesses with engaged workers have 23% higher profit, while employees who are not engaged cost the world $7.8 trillion in lost productivity, equal to 11% of global GDP." in the report, the main section that appeared was this: The other potentially relevant section that appeared was this: Neither of these sections give any idea of how Gallup came to the conclusion, but the link in the first section contains a link to a different document that probably forms the foundation/primary source for their analysis. I mean if the independence of employee engagement doesn't hold, then the causal inference doesn't go through, and you can't infer that engagement has this much effect on productivity... ... however this sounds like a different form of independence than the one I brought up.

Apologies if I misunderstood your argument.

  1. You open your argument with saying, in essence, that people hate their jobs and are miserable at their jobs.
  2. You then argue that socialist firms are better for employees.
  3. The logical inference here would be that socialist firms make for happier employees.

Is this a reasonable summary?

However, in the "Are socialist firms good for employees?" section, you do not give much evidence that workers in socialist firms are significantly happier. Instead, the paragraph says things like:

Giving employees stock in a company seems

... (read more)

I was about to just downvote and move on, but there are enough comments and votes that it seemed worth figuring out why I object.

I think I don't object to the concept.  Go for it!  Make whatever form or organizational governance you like.  Presuming you don't try to force others to use these mechanisms, it's a fine thing.  If it's actually better, it will grow and become more common.

I am curious what you think is the reason that it isn't very common (or exists at all) in successful organizations - whether for-profit, non-profit, or soci... (read more)

Ownership is not the same as leadership. For example, you could own 1/N shares of the company you work at, try using them at the shareholder meeting to influence the future of the company, maybe even try to replace the CEO... but when then shareholder meeting is over, you become just another cog in the machine for the rest of the year, except that you also get 1/N of a part of profit at the end of the year as a bonus. If I remember it correctly, Mondragon Corporation has regular elections, where employees elect a supervisory board, which appoints the CEO, who basically directs the company in the classical top-down way. The supervisory board can replace the CEO at any moment. The employees can elect a new supervisory board at specified time intervals. (Not sure I remember it exactly.) Leaving is not a problem; they even pay you your fraction of the company value. This ironically makes joining a potential problem, because you need to buy your share of the company, but the company can lend you the money that you later pay back via income deductions.
Cool, TIL. [] looks pretty cool.   On long enough timeframes, ownership determines leadership.  If you own 1/N of a company, for a very large N, you don't have much control, but the group of you which own a large amount does have a whole lot of influence over management and decision-making.  You're absolutely right, though, the OP should have specified both entry and exit mechanisms, and relative quantities of ownership to qualify as "socialist".   One could argue that every public company is socialist - ownership is open to anyone who can spend a few hours wages on shares of stock.  I suspect that wouldn't make the cut for this post.  What DOES identify a socialist ownership or management of a corporation or other changing- and voluntary-membership organization? Of key importance: how are allocation decisions made (i.e. should this year's profit be distributed to past contributors/owners, workers (recent workers in retroactive bonus, current workers in higher pay or instantaneous bonus, or future workers in higher pay bands and more hiring), or reinvested in equipment upgrades)?  
It is typical to buy the stock of a company for the dividends or the growth of value of the stocks. In order to activate the "socialist mode" of such open stock arrangement somebody outside the company would buy stock in order to influence work conditions to be more humane just for the sake of promoting sensible working conditions. In some company forms this is forbidden. Making idealist decisions that hurt the bottom line that are not even trying to indirectly increase profits runs afoul of the structure of a money making machine. For-profits run into trouble if they have genuine non-profit activities. Law likens that to fraud of majority shareholders towards the minority shareholders rather than arbitrary usage of property. One could offcourse dissolve a company and start a non-profit with the same assest. But it highlights that you can't creep into non-profit bit by bit but a for-profit remains a for-profit as long as it stands. Conceptually, you need to spend those funds as a consumer for ideological effects.
I notice I'm confused.  Converting an existing corporation to socialist mode would mean buying out ALL the stock (presumably by or at least for the employees), wouldn't it?  As you point out, a mixed-ownership model, where some shareholders think they are owed profits, and some shareholder-workers think they are owed non-profit-benefits is going to anger some or both groups. No way for the corporation as a unit to partly convert, but presumably workers could buy/spin-off/create SMALLER units out of the corporation.  Or, as so often seems to be the assumption in these conversations, since capital has no value or claim to revenue, just walk away from it and start their own. I also notice that I've been mind-killed - I want to steelman and understand the appeal and gears-level workings of this organizational principle, but I'm failing.  I apologize, and am bowing out of this conversation.  Feel free to rebut anything I've written, I'll read but not respond.
If you get the corporation to dissolve then you could use the share that your shares entitle you to take control of only that part of the whole thing. If some parts are more human-involved then the non-human involved parts might not be desirable in the new organization. Ie have 60% of the stock, force dissolution outcome, keep/buy all the employement relations with your share and try to negotiate for the 40% to run away with the money and steel. If ideological stock remains a minority voice then the profit side can just choose to keep intact. If it is especailly clean it might just result in a "split" (rather than a fusion) of 40% of the operations keeping to the for-profit order and could even keep operations in tact. In super peaceful conditions the 60% could even keep customer relations to the 40% where a total break is not possible. Corporations typically get distrubed if random parts of them need to be reset so the price to buy out random parts is probably a bit more what it would "objectively" be. Degree of ideological fervor might make it okay for the new establishers to take losses. Keeping your parts dependent means this kind of distruption happens less often. If everybody works to subsistence all the time then this threshold can never be met. And it is typical for the part to be benefitting the whole. There the old order is not ambivalent but a bit against part removal (lost profits are lost profits after all). And like you can't operate 0.1 of a powerplant there is a coordination problem for enough people to detach at the same time to form a sensible new unit before anybody can leave. Competition proofs often require no barriers to entry, reorganization tends to not be a free action so spontanoues fission is not seen. A pure hunter-gatherer could try to detach from society by only gathering food for themself. Having job specialization is more efficient per unit of work. But having a specialization and hunter-gatherer capability is wasteful. So we find p
I think an important part is that the interests of all employees are (hypothetically) aligned. So even if you only own 1/1000 of the company, the remaining 999 shareholders also vote for the things you want. As opposed to your example when someone buys 1/1000 of the company, but has no impact on the outcomes, because the remaining 999/1000 votes are incompatible.
Wow.  I have to admit I hadn't heard that dimension before, and I'm not sure I get it.  Humans are generally not aligned, especially on the level of who gets what jobs and how much they get paid.  Does that mean it's impossible in the real world?  Or do I completely miss your point?
Workers at a business are generally more aligned with each other than they are with the shareholders of the business. For example, if the company is debating a policy that has a 51% chance of doubling profit and a 49% chance of bankrupting the company, I would expect most shareholders to be in favor (since it's positive EV for them). But for worker-owners, that's a 49% chance of losing their job and a 51% chance of increasing salary but not doubling (since it's profit that is doubling, not revenue, and their salaries are part of the expenses), so I would expect them to be against the policy. The same goes for things like policies around worker treatment - if a proposed policy would increase profit by 10% but make workers have a much more unpleasant environment, shareholders would probably vote in favor while worker-owners would vote against. Obviously there are some shareholders who would go against their profit motive for improving the lives of stakeholders (see ESG funds), and workers who would choose a chance for more money over better working conditions or a lower chance of lowing their job. But I would generally expect the two groups to disagree with each other but be aligned internally.
I always like it when I can upvote and disagree :)  I think you have to be in VERY far mode, and still squint a bit, to think of that as "alignment" to the degree that distinguishes socialist from conventional organizations.  Sure, employees as a group will prefer higher median wages over more profits (though maybe not if they're actual owners to a great degree), but I have yet to see a large organization where workers care all that much about other workers (distant ones, with different roles, who compete for prestige and compensation even while cooperating for  delivery).   Conventional org owners/leaders care a lot about worker retention and productivity, which is often summarized as "satisfaction".  I have seen no evidence in my <mumble> years at companies big and small, including both tech and non-tech workers that office workers care more about warehouse workers than senior management does.  There is probably slightly more for warehouse workers caring about workers in other warehouses, but even then, there's cut-throat hatred for closing "my" warehouse rather than someone else's.
Without the qualifier "different roles" I had in mind that you can privately not like peeing into to a bottle to be pretty well correlated with your coworker also not liking it without you considering each other. And then when I apply the same about office workers thinking about warehouse workers peeing in bottles it seems they would not be ambivalent but slightly against. While it is quite easy to see a manager wanting a policy that has 10% number increase and no numeric effect on any other number to be default in favour. In reverse this can be seen that a worker is unnaturally insulated about the meangingfulness of their task. Moving boxes day in day out probably feels very samey, while a manager can see that now we are serving this nationality people and now that. Or indeed that with no increase customers per worker might be 10 and with 10% increase we have 11 customers per worker. And offcourse customers have a difficult time telling whether their packages were done pee-bottle-free. While workers are not especially knowledgeable they are uniquely situated for certain kinds of information. So even if they are not especially homogenous the dimensions on which they base opinions on are probably the same. Also if you know you are powerless it is easy to not care. If you are an office worker and know you do or could have a say, "pee bottles in my company" activates accountability differently. If you are not so situated you will probably frame is as "their company", "company I work at", "Big dude that breaths into my neck is equally asshole to those guys too".
If workers own the company, they might agree on more vacation, no unpaid overtime, better working conditions, etc. These would be the shared preferences. If someone else owns the company, they will typically want a CEO who squeezes out of the company as much profit as possible. Everything else is purely instrumental. Yeah, it might happen that giving people more vacation is good for attracting talent that generates more profit, in which case the company might also decide to provide more vacation. Or maybe the CEO decides that vacation is irrelevant, or should only be given to people working at certain selected positions. Basically, from the perspective of a worker it is mostly random, but more often bad news. If you are one of 1000 workers, and you own 1/1000 of the company... but other workers did not buy shares, so 999/1000 of the company is owned by someone who doesn't work there, do not expect the company to be any nicer to you than is strictly necessary. EDIT: After reading your other comment... I think that people are more likely to empathize with people in a similar role than with people in a different role. As an "individual contributor" myself, I find it natural to empathize with people who have to do overtime and hate it. But who knows, maybe in a parallel world where I am a manager, I empathize with managers who get frustrated with the lazy bastards who prioritize their family and hobbies over getting their boss a well-deserved bonus. But even if I had zero empathy towards people in a similar role, arguing for the benefits of everyone is a Schelling point. I can get more support for "more vacation for everyone" than for "more vacation for Viliam".

My guess is that the main application area this should be investigated for is promotion / facilitation in developing countries. [I don't see an obviously good way to shift US/European policy to promote this, and would rather limited reform effort be spent towards something like land use / permitting / voting reform. EA organizations are generally either non-profits (where making them 'co-op's seems unlikely to have large effects) or for-profits where limiting the upside to owners is probably undesirable (since the for-profit's EA value is typically earning... (read more)

Sorry guys. I woke up to another giant batch of new comments and I just don't have the time or energy to respond to them all with the quality that I would want. My comments were already getting shorter and shorter while my longer, more nuanced comments were getting sniped before I could post them. I'm sure some of you made some excellent points.

re: whether socialist firms work, I think the main problem is going to be managers making worse decisions because they're more blended with the interests of labor. For example, a firm where decisions are made by the workers-as-a-whole probably wants to pay workers according to their average product instead of their marginal product, but this means they'll hire too few workers (as average product is larger than marginal product, and so the 'last workers' are more expensive in the average-product firm).

Why don’t you cross post to the EA forum, by the way?

I've not read much in this area and have not even tried to follow through on the references provided in the OP. I'm open to being told I should have as some directly address my comment.

I think the big question to ask here, if one is advocating expanding the "socialist firm" (quotes since that can refer to a number of somewhat different structures) is conditions in which those forms are superior to the normal corporate structure. In other words, given all these forms exist in the current economic landscape the claim seems to be that we're out of equilibrium and marginal adjustments will produce a better equilibrium position.

One issue that arises with starting a socialist firms is acquiring initial investing. This is probably because co-ops want to maximize income (wages), not profits. They pursue the interests of their members rather than investors and may sometimes opt to increase wages instead of profits. Capitalist firms on the other hand are explicitly investor owned so investor interests will take priority.

This does not explain e.g. why we do not have more software development co-ops. The costs of starting a new software company are not that high, and a gr... (read more)

I think the biggest issue in software development is the winner-takes-all position with many internet businesses. For the business to survive, you have to take the whole market, which means you need to have lots of capital to expand quickly, which means you need venture capital. It's the same problem that self-funded startups have. People generally agree that self-funded startups are better to work at, but they can't grow quite as fast as VC-funded startups and lose the race. But that doesn't apply outside of the software sphere (which is why VC primarily focuses on software startups). Beyond that, they're just not that well known as an option in the US, and all of the narrative is about venture capital based startups, so founders haven't considered co-ops as an option. Despite that I am aware of a few software co-ops (primarily consultancies, since they don't have the large capital needs).

I highly recommend this video for those wanting a more detailed analysis of the pros and cons of worker co-ops

My first thought: there’s a sliding scale between worker ownership and investor ownership and it might be much more tractable to increase the share of worker ownership than to increase the number of 100% worker owned firms.

My second thought: if the benefits of worker ownership are due to superior governance, maybe increasing worker ownership should go along with weighing interests of different agents via geometric expectation maximisation

Startups sometimes offer shares to their early employees, but it seems to me this is usually some kind of scam. Or maybe "scam" is an unnecessarily harsh word, but it is definitely a form of "it does not mean what you assume it means, and I strategically do not correct your misconceptions which are obvious to me". Only a smart fraction of startups sells for millions, but when they do, only a small fraction of employees who own shares actually gets rich. Most often they find out that their shares are some special kind of shares (different than the ones owned by the CEO), and therefore... blah blah... they are practically worthless. Or they find out that the shares were so diluted that although the company grew 1000×, the value of the shares did not. Etc., I am sure new tricks to make employee shares worthless are being invented every day. So, I guess a campaign to make co-ops more attractive should include an explanation why current employee shares are for all practical purposes not a form of worker ownership.

I'm impressed how modern EAs manage to spin any cause into being supposedly EA.

There's just no way that things like this are remotely as effective as say GiveWell causes (though it wouldn't even meet a much lower bar) and it barely even has longtermist points for it that can make me see why there's at least a chance it could be worth it.

EA's whlole brand is massively diluted by all these causes and I don't think they are remotely as effective as other places where your money can go, nor that they help the general message.

It's like people get into EA, reali... (read more)

The article mentions EA exactly twice. One is to quote the "80,000 hours" figure. The other is at the end, suggesting that EA organizations should consider adopting the sort of structure the article argues for. Neither of these things claims, or implies, or even suggests, that shifting firms to a worker-cooperative model is an "EA" cause in the sense of being a more effective thing to do with money than, say, feeding starving poor people or preventing cheaply-preventable disease or (for those who favour such things) trying to increase the probability that some time in the future there are a billion trillion gazillion happy satisfied productive people. (I don't know whether Ben is correct about worker cooperatives being a better organizational structure in general. I don't know whether EA organizations are similar enough to other businesses that this would indicate it's a good structure for them. But if it is a good structure for them, they should consider using it even if persuading others to adopt it isn't an efficient use of money.)
What else could the "as a cause" in "socialist firms as a cause area" possibly mean, except "as an EA cause"? The title wouldn't make sense if it just meant "as a cause, but not as any particular kind of cause", and the only particular type of cause being discussed is EA. I also don't think that "alleviating misery" in this context can mean anything other than "alleviating misery, because you are EAs and EAs want to get rid of misery".
I agree that "cause" here means "thing people trying to improve the world might want to consider putting time, money and/or effort into". I don't think it means "thing that is likely to be better in good done per dollar used than GiveWell's top recommendations". If I wanted to spend money on making more firms be co-ops, I don't even know how I'd do it. It doesn't look to me as if the goal of this post is to recommend spending money on making more firms be co-ops. My reading of the "conclusions and policies" section of the post is than Ben is saying two things: 1. It would be nice if there were more co-ops. 2. EA organizations might want to consider co-op structures. I don't think #1 is intended to say "... and therefore EAs should be sending their charitable donations to organizations lobbying for there to be more co-ops"; I think it's just a wouldn't-it-be-nice-if. I think #2 is intended to suggest something EAs might want to do, but if Ben's right then doing it wouldn't compete with other things they do but would help those things. (I have no strong opinion on whether Ben is, in fact, right about this.) Now, to be clear, I am not Ben and I don't speak for him. Maybe he did mean more than that; maybe he does think that people wanting to give to EA causes should be sending some of their money to organizations doing co-op advocacy or something of the sort. If so, I agree that that's unlikely to be as effective in good-done-per-dollar than, say, antimalarial bednets. So if he didn't mean that, was "... as a cause" a bad choice of phrasing, as Tenoke says? Not necessarily. I think the diagnosis at the end of Tenoke's comment is probably right: people get into EA, want to do things as well as giving money, and come up with other things to do. But Tenoke evidently thinks that's clearly bad; I don't. Effort isn't fungible in quite the way money is. If Ben is more excited by co-ops than by bednets, his donations should probably still go to bednets[1], but his time mig
2B Jacobs4mo
Do you have any evidence for this? Not all EA's are longtermists.
My prior is that other things are less effective and you need evidence to show they are more effective not vice versa. Of course. I'm saying it doesn't even get to make that argument which can sometimes muddy the waters enough to make some odd-seeming causes look at least plausibly effective.
-1B Jacobs4mo
Appeal to presuppositions always feels weird to me. A socialist could just as easily say 'my priors say the opposite'. In any case, you made a claim of comparison, not me, why is the burden of proof suddenly on me? I'm trying to explain the scientific literature on co-ops, not persuade you of some scam.