[Pen-l] Re: The Mirage of Economic Efficiency

["Julio Huato" <juliohuato@xxxxxxxxx>]

Michael Perelman wrote:

> Almost 70 years ago, George Stigler introduced the
> concept of flexibility. A business might be highly
> efficient, but it may not have the flexibility to meet
> changing conditions. Stigler.s point is largely
> ignored. I would prefer that other parts of his work
> were ignored, but I do not have much say in such
> matters.

Michael,

The concept of "efficiency" you criticize is the static one.  Today,
that's used only to show undergrad students some very basic results.
It's a pedagogical device.  Perhaps it was taken seriously when
Stigler was young -- and ignorant of other people's work?  But then,
in 1928, Ramsey published his mathematical theory of saving.  And in
1931, Hotelling published his economics of exhaustible resources.
Nowadays, everybody knows that efficiency is dynamic.  And on top of
that, economists know that uncertainty, information issues, and a host
of issues make a difference in the interpretation of efficiency.  With
all due respect, I don't see the point of such qualms.
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