Efficiency. How economists love it. If you have microeconomist friend (or perhaps even a macroeconomist), you’ll probably already know about how amazing efficiency is. Efficiency. Economists like efficiency so much, they have three different names to describe three different kinds of exciting efficiency. There’s productive efficiency, which is all about minimising cost, which is probably what normal people (not economists) mean when they talk about efficiency. But economists have two other kinds as well: allocative efficiency is all about ensuring people who value a good above the amount it costs to make it get to consume it. And most excitingly, dynamic efficiency is all about investments and innovation that deliver net benefits to society.
All good stuff. But sometimes it feels like there’s something a bit sinister about efficiency as I shall go on to demonstrate with an absurdly small sample of amusing fictional characters. Take Dexter: sinister, but rather efficient at clearing up all that blood. Take the Efficient Baxter, secretary to Lord Emsworth in P.G. Wodehouse’s Blandings stories, who is later found flinging flower pots at windows. Take.. ok, I’ve run out of examples. But, efficiency does sometimes have a certain cold, uncomfortable tinge to it.
I started thinking about this while reading “Identity Economics” by George Akerlof and Rachel Kranton, which explains how social identity can explain economic behaviour. In particular, they describe the dynamics of working for an employer, and how employers can turn workers into “insiders”: workers who identify with the firm and therefore gain benefit from upholding its ideals. The military is quite good at doing this: “initiation rites, short haircuts, bootcamp, uniforms and oaths of office are among the common means of creating a common identity”. When employees strongly identify with a firm they need fewer monetary rewards to encourage them to work hard.
Which does seem rather efficient in some respects. But am I the only one to find the idea slightly sinister?