Sunday, February 28, 2010

The Value of Efficiency

Carpe diem. Seize the day. With all the rushing around we do, I'd say we take this phrase to heart. But why do we hurry to get things done? Why do we take on so much in a day? Well, there's a good reason: we know the value of efficiency.

Efficiency means getting desired results without wasting time or effort. We hurry to get things done so we have time left over for fun and relaxation. We take on so much in order to live life to the fullest. Efficient allocation of time leads to healthy and impactful lives.

Similarly, efficiency strengthens economies. Distinguished economist Thomas Sowell cites history to support this claim. For example, China's departure from Mao's heavy-handed government control led to an economic growth rate of 9 percent per year between 1978 and 1995.1 As we discuss America's economy, it's important to understand that efficiency is the lifeblood of free enterprise, yet the antithesis of government.

Companies must be efficient to survive. Successful companies produce desired goods and services without wasting resources. This lowers production costs, which lowers prices for consumers. Thus we get what we need for less, and have money left over for spending (which creates jobs) and charitable giving. The free market system of companies cutting costs to survive has given us our world-class standard of living.

Contrastingly, government does not need to be efficient to survive. In fact, government is often motivated to waste. Take the 2009 Stimulus Bill, enacted to create jobs via shovel-ready projects. The bill's success is defined by the number of jobs created (number of workers used) for a given project. As a result, success is achieved by wasting workers! To illustrate this, imagine that 20 people are needed to build a bridge. The government could do the job with 20 people, but why not hire 100? Sure, manpower would be wasted, but more jobs would be created! This inefficient approach certainly helps the 80 extra workers, but ultimately prevents them from working to meet real needs in America.

This inherent difference between business and bureaucracy is the reason why free enterprise is the backbone of a strong economy. As America faces its highest unemployment in decades, Americans should support policies that promote efficiency.

1. Thomas Sowell. Basic Economics, pg. 27.


  1. But free enterprise doesn't inherently meet the needs of a populace, either. It CREATES needs/desires and, which then spurs a race to meet those needs/desires in the lowest-cost highest-profit way. That is where efficacy comes into play, I suppose, but this is to support a bottom line, not to promote any amount of public good, which I assume you are pretending to be interested in since you use the phrase "working to meet the real needs in America." There is no particular reason why government CAN'T be as efficient as private industry, other than that (as you correctly point out) this is neither an absolute necessity nor a current priority. But there is also no particular reason why efficacy should be used as a litmus test over, say, public interest.

    There is a Walmart coming to my urban neighborhood. Nobody wants it here (there is any amount of public opposition and I have literally not seen a single pro-Walmart comment in this entire debate, which I have been following closely), and there is no plan for coping with the harm that will be done to local business, traffic patterns, property values, etc. However, I also have no doubt that this will be an efficiently run operation that pretends to meet the the needs it manufactures while doing whatever it takes to make as many profits as possible. If it runs true to form, it will create 200 new jobs and destroy existing 200 jobs in the immediate vicinity. And the jobs it creates will be on average lower-paying and less necessary for the well-being of the local populace than the jobs it destroys. Efficacy wins the day, I suppose.

  2. If no one wants the Walmart, then it will go out of business. All you are looking at are the Mom and Pop jobs that are lost when you get a Walmart because that is the most visible and easily measurable factor. But on net, your community will be better off with a Walmart than without it. Walmart's increased productivity will free up these other workers to use their talents elsewhere. Every time new technologies, business models, etc. increase productivity, resources naturally shift from the outdated technology to the newer one. It's backwards to say that we should try to keep these resources where they are. If we did that, we'd still have hundreds of workers doing jobs that one machine can do. If the only important criteria is the number of jobs, the government should just pay people to dig holes and more people to fill them. That might seem ridiculous, but the government does pay automakers to make cars and then destroys perfectly good ones (Cash for Clunkers). It pays farmers to grow corn no one wants and then finds counterproductive uses for the surplus (high fructose corn syrup, ethanol). Anyway, I bet more people than you think want a Walmart in your area.

  3. These comments are giving me a good read. Everyone here has got a point I can relate to.

    What I think is, in a conservative/republican lifestyle, life is going to be cutthroat. If you don't got the skills/resources or capabilities to keep up in this rapidly evolving technical world, you're gonna fail. That includes most older generations who can't pick up these new tech jobs nowadays to contribute to the evolving efficiency of this society. That's evolution, strong survives, everyone else... bites the dust. Wal-mart is bringing the heat. If mom and pop can't handle it, they're getting burned. They'll have to adjust someway or another to live by other means or by Wal-Mart's means.

  4. Thanks for the comments everyone!

    To Anonymous:
    I agree entirely with some of your points:

    - I do think that free enterprise creates needs/desires, which spurs a race to meet them. But these needs/desires include the telephone, car, television, Internet, and iPod. All of these inventions resulted from free enterprise and competition, and all of them have greatly improved our quality of life.

    - I also think that for individual companies, the goal is to support a bottom line, and not necessarily to promote any amount of public good. But maximizing profit requires lowering production costs, which lowers prices for everyone and enormously benefits the public. And the prospect of profits gave people the drive to create the aforementioned inventions and more. I believe it was classical economist Adam Smith who, because of the motivation for profit and the benefits of profit, had a high opinion of capitalism but a low opinion of capitalists. So I don't think that efficiency and public interest are mutually exclusive - I believe that for they are mostly one in the same.

    About government, it's very important to keep in mind that efficiency is not necessary for them - it's human nature for individuals to do what is necessary and to avoid what is not. And even if it was a priority, there are particular reasons why government can't be as efficient as private industry. It's not possible for any central group of people to have the kind of real-time knowledge of customer needs, and the ability to act upon them, as do localized, individual businesses. No matter how smart or hard-working government employees are, there are way too many local issues and changing needs to keep track of. For example, a local gas company knows not to order as much gas for the month that construction blocks drivers from entering the station. If a government were in charge of supplying stations around the country (on top of its responsibilities in other sectors), they wouldn't have the ability to receive such information in time not to send gas where it is not needed - hence inefficiency.