Re:Efficiency

["A. Allan Schmid" <00549aas@xxxxxxxxxxxxxx>]

In a previous posting, I raised on objection to the efficiency vs. equity
dichotomy.  Herb Gintis asks, "How is equity a form of efficiency?"  Equity
has to do with income distribution.  If you change income distribution, you
get a different set of prices which are then used to make efficiency
calculations.  Efficiency is not a unique independent phenomenon, but
follows from antecedent fundamental distributional (read institutional)
choices.
Herb says "I am looking for alternative institutions that are as productive
as the ones we have, but have less deleterious side effects."  Productivity
(as well as efficiency) has no meaning independent of institutions which
determine whose interests count as costs to others.  Is a country with lots
of steel output and dead trees more productive than one with less steel and
more trees?  It depends on relative prices and that depends on property
rights in trees and other things.  Maybe we should abandon the concept of
"side effects."  Dead trees (a place to put coal emmissions) is as much an
input into steel production as labor and iron ore.  Whether any of these
have to be accounted for as costs is a function of property rights.
Allan Schmid                      Phone (517) 355-2266
Dept. of Agr. Economics           FAX   (517) 432-1800
Michigan State University
East Lansing MI 48824  USA        E-Mail 00549aas@xxxxxxx