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The London Libertarian

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economic efficiency

EconomicsPosted by Jan Lester Thu, April 03, 2014 11:12:14

economic efficiency George Bernard Shaw (1856-1950) wrote that “Economy is the art of making the most of life” (Maxims for Revolutionists). Assuming this means *economic efficiency, it is right. If people complain that there are more important things that override being economic or efficient, then they do not grasp the intended broad sense of this expression. It means minimizing *waste in the pursuit of your goals, which is only another way of saying maximizing your overall goals, or getting more of what you want—even if that involves taking things easy, spending as much *money as possible, being a saint, or living fast and dying young.

Economists usually use ‘economic’ and ‘efficient’ to mean the same, thus ‘economic efficiency’ is a pleonasm unless contrasted with technical efficiency. Technical efficiency is the best method of achieving some goal—or possibly set of goals—smaller than one’s overall goals, irrespective of the *cost of the process. Thus diamonds might be the most technically efficient substance (lasting longest and being the most attractive, say) to have as widgets, but glass might be the most economically efficient (the best trade-off between usefulness and cheapness). Logically, one could view economic efficiency as technical efficiency that takes all goals into account.

What of *environmentalists who say that we should eat soybeans because cows are less efficient sources of protein? If they mean that it is more technically efficient, then they have a point. But as a statement of genuine (overall) economic efficiency it is false, given that one also prefers the taste of meat to soya and can afford the meat—even ignoring the other amino acids and minerals in meat and the dubious phytoestrogens in soya.

It might still be suggested that what is economic for the individual is uneconomic for people considered collectively, due to negative *externalities. That is, global human *welfare would increase if, to stick with the example, we switched to soya; as more people could be better fed. Even allowing for approximate *interpersonal comparisons of utility, and not restricting ourselves to the *Pareto criterion, this is false. It is more economic to allow the *free market to help those in *less developed countries: the market will spontaneously feed the poor better without state-imposed restrictions on the diets of the better off (see *famine). *Libertarian *anarchy is the most economically efficient ‘system’ as well as respecting *liberty and *rights.

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