The Inefficiencies of being Efficient

One of the most noticeable (and controversial) aspects of capitalist economies is their emphasis on productivity and efficiency.  Use and allocate resources wisely, with the most output for the least amount of input, and you enable a rise in living standards.  It is an underlying structural characteristic of all developed economies, especially that of the United States.  Here, an emphasis on efficiency permeates deeply into our culture.  We value punctuality, a strong work ethic (phrases like the “Protestant Work Ethic” come to mind, though it’s unclear if a relationship exists and, if it did, which caused what).  Our government has a strong military emphasis, where obedience, stealth, and stamina are a necessity.  Yet efficiency can, paradoxically, also lead to massive inefficiencies, potentially leaving us with massive new problems to deal with.

One obvious example of this is US consumerism.  The wealth that our economy has generated over time is enormous and, during periods when it reaches the “middle class”, extra disposable income has lead to explosions in consumption and the purchases of things that before were never considered “necessary”.  Wealth & income begotten by efficiency lead to an inefficient consumption of resources; we spent simply because we could.  A big example of this is the food situation in America.  People purchase enormous meals that they often do not finish, leaving entire plates full for the restaurant to throw out.  Of course, we eventually correct for our excesses for a while, with the pendulum swinging back towards efficiency.  But because technology has driven a fair amount of productivity growth, this lessens the need for a painful change in behavior.  Instead of consuming less, we can simply produce more – not necessarily from increased labor, but from more and better capital that either substitutes or complements labor.  The only reason we still have painful readjustment periods is because, despite unprecedented productivity growth and widespread income growth (for a fair amount of US history, at least), consumption has a way of growing so fast that new debt must be taken on, necessitating painful corrections.

There are other, less obvious, examples of when efficiencies can beget inefficiencies.  One way is that you reach a state of efficiency in an inefficient way.  For example, government spending has long been the target of the public, especially American conservatives, of being wasteful and unproductive (especially compared to the private sector).  Their ire is often directed at legislators, especially when it is revealed that no one has read bills that are passed and funding for special projects slips through, and fiscal conservatives regularly insist that officials comb through every appropriation and spending item.  However, the sheer amount of time and resources to investigate many of these expenditures could arguably outweigh the cost of funding some special projects.  Although government spending would surely be more “efficient” if funding for  “wasteful” projects were eliminated by having legislators look at every item in detail, it would come at a huge opportunity cost: to pass important legislation and go about the business of governing.  It would also involve more time and resources for investigation, and a setup of parameters of what truly makes a project “wasteful”.  Besides, the creation of specialized bureaucracies (another indication of a capitalist mindset – keyword “specialization”) have helped to target, control, and track individual governmental endeavors, helping to restrain inefficiencies.  The lesson?  Sometimes, its ok for spending to be increased, even if it is redundant or wasteful – because the cost of finding inefficiencies could outweigh the benefits of actually eliminating them.  The problem is, we won’t always know when this is the case – and finding out when this is the case could also be inefficient and a waste of resources.  Ironically, if we want to continue to have a government, we will have to accept that it will be wasteful – and that this waste might be the most efficient option we have.

The question is, at what point does the market-oriented mindset of efficiency paradoxically defeat itself?



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