262:, which are significant in real markets. Furthermore, Pareto efficiency is a minimal notion of optimality and does not necessarily result in a socially desirable distribution of resources, as it makes no statement about equality or the overall well-being of a society.
203:. This is again the case for the long run equilibrium of perfect competition. For an extensive discussion of many other types of productive efficiency and its measures (Farrell, Hyperbolic, Directional, Cost, Revenue, Profit, Additive, etc.) and their relationships.
535:
Sickles, R., & Zelenyuk, V. (2019). Measurement of
Productivity and Efficiency: Theory and Practice. Cambridge: Cambridge University Press. doi:10.1017/9781139565981
357:
states that if there is some unavoidable market distortion in one sector, a move toward greater market perfection in another sector may actually decrease efficiency.
177:, the resources must be allocated to various industries in just the right amounts, otherwise too much or too little output gets produced. When drawing diagrams for
146:
Further, there are differences in views on microeconomic versus macroeconomic efficiency, some advocating a greater role for government in one sphere or the other.
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are generally believed to be closer to efficient than other known alternatives and that government involvement is necessary at the macroeconomic level (via
181:, allocative efficiency is satisfied if output is produced at the point where marginal cost is equal to average revenue. This is the case for the
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311:(English-speaking countries, notably the United States, United Kingdom, Canada, Australia and New Zealand) this is associated with
17:
200:
534:
199:. When drawing diagrams for businesses, this condition is satisfied if the equilibrium is at the minimum point of the
143:, though these terms are also used more narrowly to refer to particular views, especially advocating laissez faire.
346:, and move toward economic efficiency. However, there is no clear theoretical basis for the belief that removing a
75:
may be allocatively but not productively efficient, or productively but not allocatively efficient. There are also
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provides some basis for the belief in efficiency of market economies, as it states that any perfectly competitive
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definitions and measures. All characterizations of economic efficiency are encompassed by the more general
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Markets and freedom: Achievements and limitations of the market mechanism in promoting individual freedoms
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Advocates of an expanded government role follow instead in alternative streams of progressivism; in the
166:. In other words, when every good or service is produced up to the point where one more unit provides a
55:: no additional output of one good can be obtained without decreasing the output of another good, and
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354:
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278:(little or no government role in the economy) follow from the 19th century philosophical tradition
231:. At the microeconomic level there is debate about how to achieve efficiency, with some advocating
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government involvement). These are at times competing, at times complementary—either debating the
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405:
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103:
There are two main standards of thought on economic efficiency, which respectively emphasize the
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258:. The assumption of perfect competition means that this result is only valid in the absence of
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government involvement. Broadly speaking, this dialog takes place in the context of
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38:, depending on the context, is usually one of the following two related concepts:
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235:, to remove government distortions, while others advocate regulation, to reduce
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Situation in which nothing can be improved without something else being hurt
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if the price of a product that the market is supplying is equal to the
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occurs when units of goods are being supplied at the lowest possible
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Thomas. Government
Regulation of Business. 2013, McGraw-Hill.
49:: any changes made to assist one person would harm another.
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to consumers less than the marginal cost of producing it.
591:
Patnaik, Prabhat (1997). "On the
Concept of Efficiency".
505:
Encyclopedia of
Quality of Life and Well-Being Research
365:
Economic efficiency can be characterized in many ways:
149:
338:
is the implementation of policies that aim to reduce
131:level of government involvement, or the effects of
239:and imperfections, particularly via internalizing
503:Petrou, Anastasia (2014). "Economic Efficiency".
613:
282:. They are particularly associated with the
91:when it maximizes desired outputs (such as
562:. New York, Oxford University Press (USA).
422:Applications of these principles include:
350:will always increase economic efficiency.
67:These definitions are not equivalent: a
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319:. In Germany the guiding philosophy is
297:(from the 1870s onwards), and with the
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14:
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315:and, at the macroeconomic level, with
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150:Allocative and productive efficiency
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206:
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565:
162:consumers place on it, and equals
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248:first fundamental welfare theorem
173:Because productive resources are
115:government involvement) and the
59:proceeds at the lowest possible
560:Economics of the welfare state
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1:
593:Economic and Political Weekly
513:10.1007/978-94-007-0753-5_818
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154:A market can be said to have
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211:The mainstream view is that
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545:Economics, fourth edition,
448:
427:Efficient-market hypothesis
360:
10:
648:
577:Oxford Economic Papers, 45
95:) given available inputs.
355:theory of the second best
83:concept that a system is
465:Distribution (economics)
293:(through the 1870s) and
201:average total cost curve
406:social welfare function
385:Kaldor–Hicks efficiency
375:Distributive efficiency
313:institutional economics
460:Compensation principle
390:Operational efficiency
295:neoclassical economics
18:Efficiency (economics)
608:article by Paul Heyne
400:Productive efficiency
370:Allocative efficiency
193:Productive efficiency
156:allocative efficiency
53:Productive efficiency
470:Economic equilibrium
432:Microeconomic reform
340:economic distortions
336:Microeconomic reform
331:Microeconomic reform
280:classical liberalism
260:market imperfections
223:) to counteract the
183:long-run equilibrium
99:Standards of thought
622:Economic efficiency
595:. October 25, 1997.
455:Business efficiency
317:Keynesian economics
291:classical economics
229:Keynesian economics
187:perfect competition
137:economic liberalism
36:economic efficiency
404:Optimisation of a
380:Dynamic efficiency
272:limited government
266:Schools of thought
252:market equilibrium
197:average total cost
61:average total cost
558:Barr, N. (2004).
480:Uneconomic growth
475:Pareto efficiency
443:Welfare economics
437:Production theory
395:Pareto efficiency
348:market distortion
47:Pareto efficiency
16:(Redirected from
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632:Economic reforms
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571:Sen, A. (1993).
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256:Pareto efficient
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111:(and reduced by
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309:Anglosphere
119:created by
117:distortions
109:governments
107:created by
105:distortions
81:engineering
616:Categories
491:References
284:mainstream
179:businesses
125:increasing
113:decreasing
57:production
43:Allocative
323:, in the
299:heterodox
85:efficient
71:or other
449:See also
361:Criteria
133:specific
411:Utility
129:overall
121:markets
93:utility
89:optimal
549:, p281
439:basics
175:scarce
69:market
77:other
353:The
342:via
246:The
219:and
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289:of
254:is
185:of
139:or
87:or
45:or
30:In
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