Worker cooperatives are firms that, unlike traditional firms, are run democratically. This means that instead of the owner of the firm deciding who manages the workers, the workers become part owner and get a say in how the firm is run. This has some advantages, such as workers working harder and productivity appearing to increase.

Wait… how's that even possible in theory?

You might be asking yourself: won't workers become lazy since the profit is shared with their colleagues, which means they only get a small proportion of the fruits of their individual labor? According to the free-rider hypothesis, rational and self-interested agents will always have an incentive to put in less effort and be a parasite to the efforts of others. That's literally the first lesson of game-theory 101.

Yes, but this is solved by the second lesson of game-theory 101: repeated interactions. Once you can build [...]

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Outline:

(00:30) Wait... how's that even possible in theory?

(03:02) Could this be selection bias?

(04:02) Why aren't there more worker coops?

(05:28) Return on investment

The original text contained 1 footnote which was omitted from this narration.

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