Ethics & Economics 3: Efficiency

This is the third in an occasional series on the relationship between ethics and economics.

The topic of this posting is efficiency. As it happens, efficiency has been in the news this week. Michigan lawmakers are currently debating changes in fuel-efficiency standards for cars. (The White House wants to raise efficiency standards, something that is of clear concern to auto-makers in Detroit.) Secondly, the Washington Post reports today that the World Trade Organization is expressing concern that a recent wave of trade accords may hamper the efficiency of international trade.

In its generic sense, efficiency is just a measure of how good some system is at turning out maximum outputs given minimum inputs. Efficiency is arguably the only virtue contemplated by economics. Economics texts have relatively little to say, for example, about justice or about rights. Economists are proficient at explaining the conditions under which markets function efficiently, but they tend to back away (or to plump for their own intuitions or ideologies) when asked whether particular market outcomes are fair.

But what about efficiency as a moral value? In general, efficiency is morally good, and so it is a mistake to think of efficiency as merely an economic value. Certainly few people would argue in favour of inefficiency. Inefficiency means waste. Inefficient use of resources typically implies unnecessary environmental damage. And inefficient production typically means fewer people benefiting than might have been under more efficient production methods.

But efficiency is not always good; it depends on the outputs being sought. Recall that Hitler’s death camps were designed to be a highly efficient means of genocide. More generally, efficiency in the production of something bad is a bad thing. For example, GreenPeace is sure to see the efficiency of modern logging machines or deep-sea trawlers as a bad thing.

Much more remains to be said about efficiency. The key point to make, however, is that efficiency is not “merely” an economic value. We all need to care about efficiency. And even when other important values are at stake — as is almost always the case — we do well to begin by understanding which of the available solutions is most efficient, and what loss or gain in efficiency is going to accompany any proposal to change things in pursuit of other values.

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