Efficiency is NOT the top economics priority


This is my own summary/understanding of a paper about the Insufficiency of Efficiency. I found it interesting because it complements what I recently read about the need for society to adapt as soon as possible to a much smaller EROI (energy return on energy invested). Corrections and feedback are very welcome.

In economics, the term efficiency refers to the efficient allocation of resources. The faith in efficiency as the top priority in economics is misplaced. Efficiency is an important goal of the economy, but it only comes after sustainability, justice and desirability of goals and outcomes.

The reason is that the economy is a not value-neutral, human-built institution. The rules that govern it affect everybody in ways that reflect societal values. Well-being depends on much more than efficient allocation of goods and services.

Sustainability over the long run is obvioysly essential. In spite of this, efficiency doesn’t guarantee that the economy fits within the capacity of the ecosystems that contain it. If ecosystems were unlimited and invincible this wouldn’t be a problem. But the negative impacts of economic activities on ecosystems are irrefutable. It is as much the scale of our activity as it is the type of activity that threatens environmental health. Being more efficient at an unsustainable scale is still not sustainable.

In addition to this, efficiency takes no account of justice, and in any case achieving it is only useful when applied to a desirable goal. The original paper illustrates this with a deliberately extreme case: moving from natural to synthetic drugs like crack greatly increased the efficiency of drug producers, but is this desiderable?

Finally, efficiency at the lower levels can lead to opposite and undesired effects at larger scales: the development of more efficient engines has caused more, not less, consumption of fossil fuels, with all the environmental and political consequences we see today.

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