IN RECENT years there has been considerable controversy over the relative desirability of farmer cooperatives as compared with firms operating for private profit, especially in situations in which the two forms of enterprise compete directly. The question has been particu- larly acute in connection with special tax treatment for farmer coopera- tives under the federal corporation income tax. The usual arguments in favor of cooperative action by farmers, such as increased efficiency in marketing, increased income for low income farmers, and anti-monopoly action are not subject to any generalized proof or disproof and are usually argued in terms of the individual's preconceptions. It is possible, however, to make an objective comparison of the results of the two forms of enterprise in at least one significant area, the probable allocation of resources in relation to economic welfare.1 This can be done by establishing certain distinctive features of the two forms of business organization and then analyzing the operating results in terms of techni- cal welfare analysis to see whether the cooperative form of organization leads to better distribution of resources from the social point of view. If such analysis should reveal that farmer cooperatives do tend to pro- mote the general economic welfare by either operating at the socially optimum level, or closer to it than do private profit firms, it would offer one basis for arguing that farmer cooperatives should receive some measure of public support, of which special tax treatment might be an example.
Journal of Farm Economics, Vol. 34, No. 1 (Feb., 1952), pp. 35-51
Published by: Blackwell Publishing on behalf of the Agricultural & Applied Economics Association