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Hogarth judge

February 2018



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Hogarth judge

Inefficiency is our friend

Posted in reply to How to Explain Everything at k5


A society where all has been optimized for maximum efficiency in the production and delivery of goods and services sounds to me like a pretty hellish place.

Civilisation, after all, is what people create in their spare time. Economic efficiency has costs of its own, in that it tends to be a ratchet that tends to make it harder for less than perfectly optimal producers to make a living. This tends towards oligopoly, a situation in which price competition usually tends to become obsolete; the few remaining competitors face roughly equal economies of scale, the aggregate demand for the sum of their outputs is also relatively fixed, and competition is for a share of that total market. Market-share competition, as opposed to price competition, is also socially undesirable: it encourages the vendors of goods and services to make more noise to call attention to themselves, and pollutes the stream of social discourse.

Economic efficiency has further social costs. The less than optimally efficient producer is driven from his chosen or traditional trade, and this leads to a great deal of stress, a rootless population accustomed to milling about, and the disruption of settled ways of life.

It follows from these premises that economic inefficiency is itself a social good: a public resource, needed to create a just and livable society, that economic forces allowed to run unchecked will tend to destroy. Naturally, this social good is entirely off the radar for the discipline of economics; which is not to say that economics is wrong, only that it does not "explain everything." This does not alter the fact that it is a social good, one which must be defended by people who are less beholden to economic ideas and whose motivations are not for profit through trade.