First, by adopting such structure, it greatly reduces the agency problem and therefore the agency cost; hence it improves efficiency. Second, it eliminates the complication of rendering protection to minor shareholders because according to the democratic organization principle, a cooperative is operated on “one member, one vote” basis.

Third, the implementation of such decision making structure may pose problems when the organization is in jeopardy. Apparently, the decision making process in a cooperative is longer than conventional firms, which may be problematic when a quick decision needs to be made and implemented. Fourth, though the full transparency reduces the problem of information asymmetry, but it as well may deteriorate the quality of decision because sometimes the effectiveness of decision is greater when it comes as a surprise.  
 
The third principle, termed as the sovereignty of labor, is associated with the incentive structure of a cooperative. It means that labor is granted full sovereignty and the wealth created is distributed in terms of labor provided and there is a firm commitment to the creation of new jobs; moreover, the income distribution is commensurate to the labor committed by each member not on the basis of holding in share capital. This incentive structure is better as opposed to the cooperatives in Yugoslavia, where the income is equally distributed to each member. The materialization of such incentive structure reduces the problem of social loafing, and gives incentives to additional labor commitment. Nevertheless, it creates a dilemma for performance appraisal, because always it is the quality of effort rather tan quantity of effort is what matters. Labor provided of a member could not be in accordance with the real performance of that member.
 
In sum, the cooperative in Mondragón is successful in a sense that it is at least equally competitive as conventional firms, but it gives members more equity. Future investigation on such cooperative system is still needed to answer the following two questions: Can the case of Mondragón be generalized as a success? Can such principles be applied on a larger scale, say a country, where a more intricate human network and grapevine is at presence?
 

Governments might be more capable of taking a longer view. Therefore, with investment decisions being made by government, it is plausible that the economy will be more likely to avoid some cyclicality and prosper in the long run. However, long run decisions inevitably are more subject to political stability, where the failure of Yugoslavia is the best demonstration. Moreover, as suggested before, if a competitive system of prices in the goods and labor markets are inescapably related to market for capital, the possibility of goods and labor markets being competitive under market socialism system is a large question mark.

Another problem with market socialism is the issue of soft-budget constraint, which enables the firm to continue to exist although its long-term obligations are not met. The existence of soft-budget constraint provides the enterprises the incentives to operate in a manner that lowers the efficiency of the economy. My last concern is specifically on the cooperative variants of market socialism, where I think labor productivity might be compromised. If the goal of each cooperative is to maximize income per labor, then each cooperative is subject to free ride resulted from social loafing. When the income pie is shared equally by each workers, then will every worker put his/her weight to production knowing the outcome of his/her effort will be shared by others.

In terms of social market economy, my concern is whether to incorporate a wide range of interests into decision making process will compromise economic performance. The concept of stakeholder economy developed in German model is subject to many criticisms. It is possible that the efficiency of an enterprise will be damaged when it includes the labor’s interest into consideration. First, decision making process becomes longer when interests from an additional party are considered. Second, when stakeholders’ preferences are considered and those preferences are against profit maximization, then stakeholder cooperation might experience difficulty because it will underperform its “profit-oriented” competitors, and thus are vulnerable to and ultimately eliminated by market forces.

The search of a third way is indeed intriguing. I am personally in favor of social market economy to market socialism. However, the current demonstration of social market economy is far from satisfying, where future modifications and completion are necessary.