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

[Michael Perelman <michael@xxxxxxxxxxxxxxxxx>]

I really have not forgotten.  I think of the lack of concerned with 
flexibility to be another dimension of the short-termism of capitalist 
business.  But I do appreciate your interest in the subject, especially 
given your expertise on Stigler.

On Thu, Aug 28, 2008 at 11:00:45AM +1000, Craig Freedman wrote:
> 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.
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-- 
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael at ecst.csuchico.edu
michaelperelman.wordpress.com
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