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The Joint Problems of Cooperatives, Kantian Social Contracts, and Howarth Principle of Surplus Distribution
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TitleThe Joint Problems of Cooperatives, Kantian Social Contracts, and Howarth Principle of Surplus Distribution  
AuthorXu Jianming and Li Wenpu  
OrganizationSchool of Economics and Management, Zhejiang A&F University;Center for Macroeconomic Research of Xiamen University; 
Key WordsJoint Problems;Rochdale Principles;Enterprise Contract Paradigm;Kantian Social Contracts;Howarth Principle of Surplus Distribution 
AbstractAgricultural operation mode has been a classic issue in political economy. Generally considered, the principles of cooperatives which International Cooperative Alliance outlined are universal. However, there is hardly any formal economic model to proof the rationality of the cooperative principles so far. The conventional wisdom in academic theory takes the cooperatives as enterprises. Cooperatives in fact are not enterprises, but the social contracts,which are Marx’ community of free men. We cannot reconcile the theoretical conflict between the “One member, One vote” principle and “surplus distribution according to patronage” principle, i.e. the residual control rights and residual claims of cooperatives. Therefore, we need to give a more accurate theoretical framework to understand the nature of cooperatives. We characterize cooperatives as Kantian social contracts. Accordingly, we use the demonstration of hypothesis proposition that if the cooperative is one-man-one-vote democratic management, and the cooperatives are to maximize the welfare of all members, the best way is to adopt the Howarth Principle of surplus distribution. With application of Ramsey model, we can not only coordinate the aforementioned inconsistency between the two core principles, but also get a new understanding to the “surplus distribution according to patronage” principle. The cost sharing of the public goods of the cooperative is matched with the benefit of the members from the public goods in steady state path of dynamic general equilibrium. 
Serial NumberWP1362 
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