Social Efficiency

The term efficiency is used in a variety of contexts. For example, engineers use the term to denote the ratio of output to inputs for specific physical activities. The engineering concept of efficiency is similar to the economists’ concept of technical efficiency. A production activity is technically efficient when the maximum possible amount of physical output is being produced for a given quantity of inputs. These concepts of efficiency imply that there is no “waste” in the production process; however, physical measures of efficiency do not necessarily imply that society is as well-off as it could be, given the resources that are being used to produce existing rates of output. This is because physical measures of output do not take into account the value that ...