Economists who favor markets argue that they generate outcomes more efficient than do socialism or government regulation. As we shall see in the next few months, economists don t like pollution because it is inefficient. This emphasis on efficiency seems strange, if not reprehensible, to many people. They are convinced that economists are so narrowly focused on efficiency that they ignore the truly important things in life. We should get rid of it whether or not it is efficient.
Efficiency is a tricky concept.
Once it is understood what economists mean when they refer to efficiency, it becomes clear that it is a much broader, and more desirable, goal than many people realize. Technical versus Economic Efficiency People often think of efficiency as an objective ratio of inputs to outputs. For example, they sometimes argue that the internal-combustion engine is inefficient because only a small percentage of the energy in the gasoline is converted into motion. Furthermore, the argument continues, it is possible to build engines that convert a larger percentage of gasoline energy into motion. But such objective measures of technical efficiency are meaningless by themselves because they leave out the relative values people place on things, values that are necessarily subjective.