The Organizational Nature of Agricultural Cooperatives: A Perspective from the Farm Problem Theory

This article uses the farm problem theory as the framework for a comparativeanalysis of cooperative, market and hierarchical organization in the agrifoodsystem. In order to carry out this analysis, the article proposes the organizationaleconomics approach to the farm problem which supplements thetraditional approaches explaining it in terms of low opportunity costs andhigh mobility costs of factors employed in agriculture. According to the proposedorganizational economics approach, the farm problem is the outcomeof inappropriateness of hierarchical and market organization for effective coordinationof agricultural activities. The central argument of the article is thatagricultural cooperatives are important because they partially perform the coordinationfunctions not effectively delivered in agriculture by theconventional hierarchical and market types of economic organization.