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

["Craig Freedman" <Craig.Freedman@xxxxxxxxxxxxx>]

You are forgetting that competition combined with uncertainty leads firms to discount the future and opt for short term efficiency over long term flexibility. There is an inevitable trade-off.

Craig Freedman

>>> "Julio Huato" <juliohuato@xxxxxxxxx> 28/08/2008 >>>
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.
_______________________________________________
pen-l mailing list
pen-l@xxxxxxxxxxxxxxxxxx 
https://lists.csuchico.edu/mailman/listinfo/pen-l

_______________________________________________
pen-l mailing list
pen-l@xxxxxxxxxxxxxxxxxx
https://lists.csuchico.edu/mailman/listinfo/pen-l