Tag Archives: economics

The Meaning of Efficiency

I’ve been thinking around the relationships between free markets, efficiency, and sustainability lately. I hope to come back to discussions of food production and sustainability soon, but for now here are some of my thoughts about efficiency:

First, I started to tease apart what is really involved with the term ‘efficiency’ apart from our common usage of it. Princeton’s online ‘wordnet’ has a nice, succinct definition of “the ratio of the output to the input of any system.” Another, less scientific way to state it seems to be ‘the best means to attain the desired ends.’ This iteration highlights the normative judgments implicit in our everyday use of the term. Efficiency in its technical sense defines the inputs to maximize outputs, whether that be production or destruction. The atomic bomb is the most efficient means to kill large numbers of people, but our goal should not be to destroy life. When we use efficiency in the economic sense, we generally refer to utilizing resources such that no more output can be got from them without additional input. Though the language is slightly different for each of these definitions, ‘outputs’ has the same meaning as ‘desired ends,’ just with different connotations(outputs=value neutral, desired ends=normative). Continue reading

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Do lottery winners deserve their money?

The concept of fairness and justice is a slippery one when it comes to economics. Especially loaded seems the phrase “I earned it.” This is invariably the defense of the wealthy and entrepreneurial classes for their comfortable material status, but the term ‘earn’ is unclear. In some contexts ‘earn’ could simply mean what one gets from a particular action. Someone can earn a medal by performing well in a race, for instance. But what if the person received a head start? Did they really earn it then? They still received it, if the judges gave it to them. This highlights the other, many times unspoken, implications of the term ‘earn,’ having to do with moral claim.

Moral claim is more complicated because it presupposes equality in means or opportunity for those who desire something. A lottery winner has a legal claim on the winnings, but random chance hardly seems like the basis that we would want to choose for determining who ‘earns’ something. We like to attribute it to effort and work ethic and creativity, but in reality, it has a lot to do with the color of our skin, our sex, and the wealth and education of our parents. Even intellectual capacity and creativity is influenced by chance, though at least here we have a bit more agency than our material circumstances.

So what does this mean for economics? It means that the phrase ‘I earned it’ really only means ‘I received it through a combination of circumstances and personal effort.’ This may not feel accurate to those who look to justify their positions in society, but it is undoubtedly true. The arguments to be made after this admission regard to what extent a person has earned their position and what their responsibilities might be to other who have received less than they deserve. This is a very touchy and personal subject, but one that tends to get avoided for the sake of politeness and comfort. If we really want to be able to say that we ‘earned’ anything, then we’d better make sure that we come to terms with the head start that many of us have been given.

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