Is 'More Efficient' Always Better? - NYTimes.com - 0 views
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All of these public policies have one thing in common: They create winners and losers among members of society. Therefore, an overarching question (on which economists themselves seem unable to agree) is whether economists in their role as social scientists should make recommendations on such issues at all — even if these recommendations are driven by the quest for greater efficiency. In fact, what does efficiency actually mean in economic analysis?
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Astute readers will have figured out by now that literally every point falling on the entire solid curve in the graph must be “Pareto optimal” by the economist’s definition of that term, not only those falling on line segment Y-Z. That circumstance makes the economist’s use of the word optimal even more dubious.
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Indeed, can it be said that a more efficient resource allocation is better than a less efficient one, given the changes in the distribution of welfare among members of society that these allocations imply?
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Can economists judge this to be a good thing? Indeed, how useful is efficiency as a normative guide to public policy? Can economists legitimately base their advocacy of particular policies on that criterion?
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But when greater efficiency is accompanied by a redistribution of economic privilege in society, subjective ethical dimensions inevitably get baked into the economist’s recommendations.