Richard Wolff rwolff at
Wed Jan 11 07:46:39 MST 1995

	In response to Ron Press and to wpc@, my argument was that
"efficiency" is an irreducibly relative term. It depends altogether on
what SUBSET of all relevant factors we choose to measure, since we cannot
know, let alone measure all the effects of any institution, act, or event
whose efficiency we propose to establish. Different people prefer
different subsets and so reach different conclusions about the efficiency
of whatever they choose to measure.
	The only reason the criterion of efficiency became at all
interesting or important was when neoclassical economists raised it to
the level of an ABSOLUTE STANDARD, so they could measure, for example,
the relative efficiency of, say, private versus public enterprises or
capitalism versus socialism or other such ideologically charged issues.
Only then did it become necessary - to shore up the ideological function
of the concept of efficiency - to teach every budding young economist how
to do "cost-benefit" analyses as the core exercise of all "applied
economics" so that efficiency - viewed absolutely - became deeply
imbedded in neoclassical consciousnesses. Sadly it found its way also
into uncritical non- and anti-neoclassical brains as well.
	The sharpest neoclassical minds encountered trouble with the
efficiency criterion across the 20th century. The trouble appeared in the
guise of the controversies over "externalities" - those troublesome costs
that could be seen as connected to economic events but which no private
enterprise ever counted. So the issue arose about what did and what did
not get counted.....which led to thorny problems used to justify state
intervention in capitalist economies when private judgements about
"efficiency" seemed to miss relevant costs (best example: environmental
degradation). Conservatives bridled at this relativization of efficiency
and sought a way to return to an absolute. Ronald Coase found the best
such way and so received the Nobel Prize in economics a few years ago for
just that achievement.
	Hence it would be sadly regressive for Marxists to remain attached
(which they should not have been in the first place) to ANY claim that there
is or could be an absolute measure of efficiency - whether or not it is
denominated in market prices (which, by the way, is not at all the only way
neoclassical theory deals with the issue) or socially necessary abstract
labor hours embodied OR ANY OTHER measuring rod.
	Marxists must bite the epistemological bullet (or it will kill
them) and recognize the irreducibly relative standards as the only ones
possible and available for measuring anything. Social and political
struggles are always in part struggles over precisely which standards
will be hegemonic in all such measurements. We need to attack the
absolutism claimed for neoclassical notions of "efficiency" because they
have, for 100 years, been systematically linked to the notion of an
absolute standard by which neoclassical values have been established as
absolutely "optimum" - that favorite and oh-so-revealing word that
neoclassical economists take from Pareto and attach to all those
ideologically loaded concepts they love so much.

R. Wolff


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