Re: [OPE-L] how can you calculate efficiency?

From: Gerald_A_Levy@MSN.COM
Date: Mon Apr 04 2005 - 09:57:15 EDT

> Wolffs argument could equally well be taken to prove the impossibility
> of engineering design. The circumstances determining the exact behaviour
> of a car or aircraft are also innumerable, but that does not itself
> prevent there being progress in the efficiency of machines.

Hi Paul C,

You raise a legitimate objection, especially since Wolff's critique
concerned both the macro and *micro* levels of analysis.

Another everyday calculation of efficiency is the calculation of
possible benefits of  investing in alternative forms of constant fixed
capital.  E.g. suppose a firm is planning on purchasing a new
form of machinery and must decide among five different (but perhaps
related) types.  Even though they would have to make assumptions
about variables that can not be known ex ante with certainty (such
as the level of economic activity in the macroeconomy over the
different 'lifetimes' of the machinery;  whether workers will go on strike
at some point during the years that the machinery is utilized;
whether the financial market and access to credit will bust, etc.)
firms will  generally attempt to calculate the most efficient technology
before they decide which one to purchase.   I.e. even though
they recognize that there is uncertainty, they still must attempt to
make these calculations, don't they?    They certainly don't throw
their hands up in the air and say that this is "unknowable".

As individual workers we can't (ordinarily) calculate with certainty
whether we will or will not die today. Yet, we act today as if we
will live tomorrow.  To be paralyzed by fear of the unknowable
would truly be an inefficient use of our lives!

Further musings on efficiency:

Insofar as design is concerned, there are different measures of
_what_ is considered to be efficient.  E.g. most yacht designers
have a bias towards maximizing *speed*.  I.e. subject to the
other design criteria established by the client (and the designer),
what is judged to be 'efficient is speed on the water.  Yet,
clearly there are alternative measures of efficiency: e.g.
minimization of  'labor' input (so, for instance, a large boat
could be sailed 'efficiently' by 1 person instead of a large crew
even though speed wouldn't be maximized;  those who advance this
criteria might view the standard view of efficiency as inefficient since
there are wasted 'inputs', i.e. unnecessary crew) or minimization of
circulating capital resources in relation to output (so, for instance,
one boat might be considered to be more efficient if it had a more
_energy_ efficient form of propulsion).  So, a discussion of the
maximization of efficiency should lead to the questions "maximization
of what?" and "maximization for whom?".

In solidarity, Jerry

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