What is the Association of Efficiency with Morality?

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What is the Association of Efficiency with Morality?

The principle of efficiency is an important concept that we hear about primarily when we hear that “the market is efficient”. I think that in terms of the stock market this implies that there exists transparency and everyone has the same information. In the matter of morality it is often used to illuminate the concept of distribution as it relates to matters of justice.

The web site oak.cats.ohiou.edu/~piccard/entropy/rawls.html provides an outline of John Rawls book “A Theory of Justice”. In this outline the author provides this account of the meaning of “The Principle of Efficiency”:

“Rawls adopts the concept of efficiency that is associated with the name Pareto in the field of economics. It is perhaps most easily described in the negative:
No system can be called efficient if there is an alternative arrangement that improves the situation of some people with no worsening of the situation of any of the other people.
In general, there are many arrangements that are efficient in this sense. Not all of them are equally just; other principles of justice must be invoked to select the most just arrangement.”

A graph is the best way to visualize the meaning of this concept. Imagine a standard two dimensional X-Y graph with X being left to right and Y being the vertical axis. Draw a convex line connecting equal length on both axis. The line represents the distribution of commodities in an efficient market. X and Y share in the commodities as shown by this line. If X gains Y loses and vise versa.

Efficiency is considered to be an instrumental matter and is an objective determination based on reasoned consideration without subjective bias. Any point on this line is a point of maximum efficiency; it is the best that is possible based on objective parameters alone.

Human rationality is very good at developing the most efficient way to accomplish a given task. Our technology is one example of our capacity to accomplish instrumental matters, i.e. matters concerning the most efficient means for reaching a proscribed end.

On the other hand we are very weak at determining matters requiring communicative rationality. Communicative rationality is that rationality focused on subjective considerations when human values are involved rather than concrete objects. We are good at developing the best means for an end but we are not so good for determining the end to be sought. The determining of ends, i.e. values is where morality enters into the equation.

On our imagined graph anything on the efficient line is best if efficiency is the only parameter of consideration. If other parameters are important then the area onto which the point of distribution occurs is southwest of the maximum efficiency line.

A theory of justice is required for us to understand how to pick that point SW of efficiency. The SW point is dependent upon our set of values and how well we understand such matters and how much we care about such matters.

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firstly, economic efficiency is not so much about human satisfaction or maximizing distribution and access to goods and services; efficiency in an economic sense is mostly about PRODUCTIVE efficiency. the efficient and constant refining of the means of production are what “markets” do; markets do not “disperse” goods and services to the most people-- this is not a principle of efficiency, at least not of economic efficiency. efficient in an economic sense just means the lack of unnecessary waste, and the concept is relative to either past or future states of production only.

if a company makes 100 units of product X for a cost of y today, but then tomorrow refines and invents its production processes so that it can now make 120 units of X for the same y cost, this is an increase in efficiency. there is no need for these products or this increased capital to flow to individuals or a maximally-dispersed number of consumers… the fact alone that this production HAS IMPROVED, from today to tomorrow, is the increase in efficiency which markets incentivize. this increasing efficiency of production is in fact the SINGLE and sole reason why free markets generate the capital and goods/services that they do; why free markets tend over time to always improve the material conditions of the people trading within them.

as for morality, well, morality has its place in economics only in that governmental bodies need to ESTABLISH free markets, or else they will not remain free. oversight and regulation of individual economic and political rights are essential for free markets to function, since when one person gains advantage over another by virtue of force or physical/coercive might, then that market itself is no longer free: it has an inherent imbalance of economic power from one individual to another. moral behavior with regards to efficiency is simply adhereing to the principles which establish free markets in the first place: that you will not use force/fraud/coercion against another, and demand that others not use them against yourself. increasing (and indeed even sustaining a constant level of) efficiency relies upon preventing some individuals from using force against others. this is because, when such force is used, efficiency no longer is incentivized, and loses its appeal: the company no longer has an incentive and motive to invest in improving its productive process when it can merely buy a political vote by lobbying Congress, and get laws passed with legislate its monopoly-power over a certain geographic area (im thinking of high-speed internet here as an easy example of this).

unfree markets rob the incentives for improving economic efficiency, since the use of force, legal or otherwise, is a faster and more effective way of gaining marketshare and improving one’s profit margins. this is one reason among many why unfree and over- or under-regulated markets are harmful to the economy itself. moral action in an economic sense will only take place (i.e. only be encouraged and rewarded) when increasing efficiency remains the most important way to improve your company’s or personal productive enterprises.

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Economics has converted labor into a commodity and thus removed morality from economics. Can a social theory properly remove humanity from labor? Can any social theory within a community be allowed to act outside of the moral principles of that community? Is a commuity acting immorally when it allows this? Is capitalism immoral?

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economics is not about “community” or social morals. its about economic morals, which is just the idea that you respect the rights of others and refrain from using force and coercion against their life and property… any other “social” morals that youre thinking of, such as maybe ‘love your neighbor’, are not applicable in an economic sense.

and labor has always been a commodity. there have always been farm hands to help with farming, workers, servants, slaves, assistants to any and almost every productive enterprise in any and all economic systems. “and thus removed morality from economics”, what does this mean? how does selling your labor-power (as opposed to your mental power) mean that you necessarily remove “morality” from economics?

morality in economics is about freedom of choice and ownership. you own that which is your property and that which you earned or inherited or was freely given to you, and you are FREE to sell your labor power, and your mental/intellectual power as well, to anyone you wish. there is nothing amoral or immoral about that, its a necessary and very GOOD and HELPFUL part of life! imagine if you couldnt “sell your labor power” to anyone, that means you would have to work for yourself and do everything yourself (because business couldnt hire anyone!); how exactly would this be more “moral” than the economic concept of employer/employee…?

and in addition, imagine the effect on efficiency if no one were able to sell their labor power to another for mutual advantage… there would pretty much BE no efficiency in the economy at all without employer/employee relations…

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Maybe because you’d be entitled to own the fruits of your labour, instead of having them alienated from you in order to enrich someone else?

Employer-employee relations only became prevalent with the rise of capitalism some 400 years ago. I suppose you think there was no such thing as efficiency prior to that?

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ah, another collectivist, welcome to ILP :smiley:

you ARE entitled to the fruits of your labor, when you work for yourself and not in a contractual relation with others; when you enter into a contactual relation with an employer, now you are entitled to whatever wages or salary that the employer dictates, and that you AGREED to.

you are not “entitled” to what HE has (wealth), just as he is not entitled to what YOU have (labor power).

that is why you get to choose where you get the best return for your labor. just as the employer is entitled to HIS fruits of HIS labor (employers work too, dont forget that-- they do far more actual “work” than employees) and thus hires people at whatever rate he wants, and is therefore free to get the benefits or lack thereof of whatever labor he can get to agree to work for him at the wages he sets, the wages the employer agrees to.

its about freedom of choice. no one, no job or employer or government, OWES you anything, regardless of how “hard” you work or how “good” your labor is. you are as valuable to someone as they are willing to pay you, just as the employer is as valuable to YOU as you are willing to do the job he asks for the wages he sets. if you dont like it, if you feel your labor is not being rewarded enough, leave and go somwhere else… or better yet, go find a way to MAKE your labor more valuable (i.e. get more education, more experience, invent something that someone wants, work harder, etc).

please mention any examples of economic “efficiency” from 1600 or before.

seriously, id like to hear them.

i will be more than happy to mention plenty of examples of economic efficiency AFTER the advent of (relatively) free markets; but of course, the track record with regard to the efficiency of Capitalism speaks clearly for itself, and needs no ennumeration. the wealth generated by free markets is irrefutably great; even collectivists cannot ignore it (indeed, they LOVE it, because its more for them to STEAL).

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But you said earlier “there would pretty much BE no efficiency in the economy at all without employer/employee relations…” Are you saying that self-employment (with no “employer/employee relations”) is not efficient?

Well, he’s “entitled” to purchase my labour power for $X and use it to produce $Y worth of wealth for himself. Y must be greater than X, or he would go out of business.

Whereas, if you were self-employed and used your labour power to produce $Y worth of wealth, you would be “entitled” to own that wealth. Arguably, that would be a more “moral” situation. And, arguably, more “efficient” as well.

I believe, with respect, that you are exaggerating the degree of freedom of choice that most people have as to where they will sell their labour power and for how much.

Define “efficiency”. If your definition includes the requirement that there be an employer-employee relationship, as your previous post suggests, then clearly, “efficiency” is a purely modern invention of capitalism. I think that’s a very shortsighted view of history.

Yes, we are seeing examples of this wonderful “efficiency” every day with the announcements of more bankruptcies, more plant closures, more unemployment, more people being made homeless, or dying unnecessarily of disease, more anthropogenic greenhouse gas emissions, more war, more hunger, etc.

Of course, if efficiency is measured solely by profits, then everything is hunky-dory.

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of course.

“he” (your employer) is not entitled to PURCHASE your labor power, he is entitled to whatever you AGREE to give him, and only as long as he keeps paying you.

your conception of “moral” here is irrelevant from an economic standpoint.

self-employment is far less efficient than division of labor and specialization.

how so?

i didnt realise your employer was holding a gun to your head and chaining you to your desk. even though thats apparently your work experience, i have to let you know that its actually illegal, and you should probably call the police or something.

i have already defined economic efficiency in this thread. feel free to scroll up.

ah, the good old straw man and attribution error. wouldnt be an economics argument from a socialist perspective without them.

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Your position that capitalism invented efficiency is only correct if efficiency means “maximizing profits for the owners of capital”.

This is laughable. There has never been, in all of human history, a more wasteful economic system than capitalism. That’s why the planet’s ecosystem has declined so rapidly in the past 400 years, after surviving for hundreds of millennia of human economic activity.

For a person who has such high regard for markets, it’s odd that you can’t recognize a simple purchase and sale transaction - you know, giving somebody money in exchange for something? Sound at all familiar?

There’s no reason why you should make such a distinction. Self-employment is perfectly compatible with systems of specialization. Slavery and feudalism had highly-developed systems of division of labour.

Very droll!

You obviously have never worked for a living, or you would realize what everybody else already knows - that most people hate their jobs, and are highly motivated to sell their labour power elsewhere, and yet they lack available alternative purchasers for it. Moreover, they have to compete for jobs with a constant pool of unemployed labour. There is no corresponding pool of “unemploying” capitalists whose families will starve if they don’t hire some employees very soon.

The labour market is only “free” for employers, who can fire and hire people at will. They don’t need to hold guns to your head or chain you to a desk. They have many other ways to enforce your co-operation, not the least of which is the compulsion of the marketplace.

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you are unable to understand the concept of a relation. i suggest you open up a 6th grade math book, unless you still need to wait a few years to get there.

X to Y as a variable, as meaning, regardless of X or Y themselves. it doesnt matter what the LEVEL OF POLLUTION IS at any given time, nor does it matter what the LEVEL OF MATERIAL PRODUCTION IS, either-- what matters is the relation between them.

in the past, material production (Y) was very, very, very small compared to today. no factories, no computers, no hospitals, no spaceshuttles, no cell phones, no TVs, no skyscrapers, no modern agriculture, no etc etc etc. pollution was also very low as well (X). so, X:Y was very high, because both values were roughly equivolent (i.e. very, very low compared to today)… now, however, X and Y have increased dramatically since then. this is also irrelevant from the perspective of efficiency as ive defined it here (it is NOT irrelevant in reality, but merely as the relation, individual values of X and Y are meaningless). so, what matters is whether, NOW, in our modern world, if Y is of a greater value now than Y was previously, to a greater degree of change than X is greater now than X was previously. do you understand? CAN YOU understand???

i very much doubt it, but thanks for playing anyways.

of course the quantifiability of the terms is abstract; however, its an exercise in thought. think about it: you were not surrounded by pollution in the past stages of history (not usually), but you are surrounded by A LITTLE pollution, now; in the past, there was almost no material production surrounding you, but today… well, today there is a TREMENDOUS, UNIMAGINABLE AMOUNT of material production and progress which surrounds you, all the time. its relative of course, but thats the point… Y has increased dramatically more than X has, and further, this HAS TO BE THE CASE, because X is a function of Y… what, am i losing you again?.. i thought so, sorry.

but hey, it doesnt matter man. dont give it a second thought.

just keep smoking your dope, keep watching MSNBC and reading Time Magazine, keep listening to your liberal hippie friends and DFL politicians tell you about the evils of modern society. nevermind that these “evils” include everything that makes your life meaningful and livable, such as easily available nurtirious food, access to world-class healthcare and medication, electricity to keep you warm when you are cold and cool when you are hot, mechanical transportation to take you anywhere you want to go in a short time, cell phones so you can communicate directly with anyone, anywhere in the world, the modern complex economic system as a whole which allows you specialize and sit in your $8 an hour job, producing practically nothing on your own, but having the advantage of being able to secure your entire living by this process by virtue of the multiplicative effect on human effort that entails from the economic system itself (this is what your employer gives you, the ability to survive in a harsh world with almost no effort whatsoever… but hey, like i said, dont sweat it, i know you dont understand, i get it. dont hurt yourself thinking too hard).

carry on, as you were…

and take comfort, youll fit right in here at ILP.
:smiley:

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I can tell I’m on the right track when you resort to insults.

It seems that suddenly the topic has shifted to environmental damage resulting from economic activity. This is very shaky ground for the defenders of capitalism. They don’t like to look at the absolute increase in ecological destruction that their economic system has wrought; they prefer to point to the ratio of what you call “pollution” (X) to levels of production (Y).

An example is the matter of emissions intensity, the ratio of greenhouse gas emissions per unit of production. The U.S. government, for example, likes to pretend that they are tackling the problem of climate change by planning to reduce emissions intensity. What it means in reality is that while the ratio of X to Y may be reduced over time, the absolute value of X continues to increase. In other words, the overall emissions are allowed to get worse. It is cold comfort to the inhabitants of the planet that the X/Y ratio may go down, even as the biosphere is being pushed towards irreversible tipping points.

But of course “pollution” isn’t a cost of doing business - it’s an externality. The air, the water, the soil, and the minerals within it - the common heritage of the human race and all the planet’s other creatures - are all available to be used up and poisoned in the production of commodities, free of charge. That’s why market economics doesn’t even take environmental costs into consideration; anything that doesn’t have an actual dollar cost is not amenable to market-based management. The welfare of humanity and the health of the biosphere are completely transparent to the market; its relentless goal, and only priority, is the maximization of private profit. That is its sole criterion of morality.

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So the sharecroppers in Post Civil War Southern US were treated fairly?

But he has always been entitled to government services in ways that I have not.

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i treat people how they deserve to be treated; mature people get mature responses, just as immature people get immature responses.

capitalism does not need to defend itself against claims that it causes environmental damage. capitalism is indifferent to environmental damage, because it recognizes that the environment is here for our use, that we MUST “damage” and manipulate our environment in order to survive. this is how the human animal survives in nature, and capitalism is the economic systems which understands this.

of course, as an economy grows, as population increases, emissions will grow as well… so, what?

pollution, as ive indicated, is merely the inefficiency of production. all production, if it could, would be 100% efficient, because this would generate the most return on investment. the ideal productive enterprise would have zero pollution, however in reality this is impossible, i.e. it is impossible to build a machine with no “cost” of operation, even if that cost is only the emission of heat energy.

free markets take environmental factors into consideration when these factors affect production itself. scarcity is one way this happens. another is public opinion. however, there is no “inherent” or “magical” status for environmental protection inherent in free market economies, as there certainly should not be.

if the environment starts to get damaged to the point of causing harm to people (this is the only sort of environmental harm that matters), there then becomes an economic incentive to fix the problem, because people will PAY YOU to fix it (i.e. there becomes a DEMAND for cleaning up or solving the particular economic problem, and this demand creates the supply); this is why only free market economies can successfully deal with environmental damage: as damage is created, as harm is created to other people, these people create the demand to fix the harm, which leads to INCENTIVE FOR PROFIT. this incentive creates the supply of solutions to environmental problems. this is the only realistic and accurate way that, in the long term (all environmental issues are long term), the economic interests and the interests of not completely destroying our environment will be balanced with each other.

further, in fact, the absolute recognition of property rights is essential to keeping pollution in check as much as possible, and since capitalism is the only economic system which recognizes property rights, it is thus the only economic system which can deal with and understand how to minimize pollution as much as possible (i.e. you do not have the ability in a free market economy to pollute another person’s property, only your own).

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i have no idea. i dont know anything about them.

yes, and that is why non-capitalist economies (i.e. economies without a “separation of economy and state”) are so harmful, because of the uneven distribution of favors, thus robbing incentives to improve productive efficiency as well as ‘meritocracy’ (keeping goods and services tied directly to public opinion) out of the economic system.

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So people who disagree with you are immature, and those who agree with you are mature. Thanks for clearing that up.

Humans are part of the environment. The indifference of capitalism to environmental damage (which you acknowledge) threatens the existence of our species and many others we share the planet with. There are sustainable ways of conducting economic activity on this planet, but capitalism is indifferent to them because they aren’t as profitable as simply continuing to plunder nature. This is profoundly immoral.

Now you’re contradicting yourself. If capitalism is indifferent to environmental damage, and environmental damage is “merely the inefficiency of production”, then capitalism is indifferent to inefficiency. This contradicts your boast about capitalism inventing the whole notion of efficiency.

This is so wrong!

If minimizing environmental damage would result in the greatest return on investment, then you can be damn sure the magical market would make sure that that is what would happen, since its entire raison d’être is to maximize returns on investment. And yet, it doesn’t operate to minimize environmental damage! In fact, as you say, capitalism is indifferent to it. And as I have already stated, environmentally sustainable modes of economic activity are less profitable, not more profitable. Which of course is why they don’t happen as long as the market is in charge.

So someone else has to try to clean up the mess. Guess who? the nasty ol’ state! Bailing out your polluting ass once again.

“Free” markets take one thing in to consideration only: maximization of profit. Anything that tends to reduce profit is to be avoided; anything that tends to increase it (like fr’instance killing off endangered wildlife to get at oil and gas) is to be applauded. And so the morality of the market place is “that which is profitable is good; that which is unprofitable is bad”. Words to live by, indeed!

The idea that you have to enshrine private property rights in order to deal effectively with environmental problems is, to put it kindly, ludicrous. In fact, the protection of private property rights has been invoked thousands of times against measures necessary to improve environmental protection.

And if you think that capitalists only pollute “their own” property, you either believe the entire planet is their private domain, or you are living in cloud-cuckooland.

Perhaps you should read more history before making confident assertions about how economic efficiency did not exist until capitalism invented it.

“Separation of economy and state” is a characteristic of capitalism? Who knew? :astonished:

Tell that to the captains of industry and finance who are getting trillions of public dollars from the state to keep their enterprises form going in the toilet.
:obscene-tolietpush:

It seems the old canard about profit being a reward to the capitalist for taking a risk with his capital is rapidly being overtaken by reality - a reality in which the state assumes the risks (using our money) and the capitalists enjoy the bubble profits. What a marvel of efficiency and morality!

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no problem.

:laughing:

keep tying those linguistic knots, i know it makes it easier to blind yourself to the obvious.

you stare as if from a thousand miles away.

we do need more bailouts, after all.

just giving the Holy State something more to do with my money.

im glad we agree here.

once again, i just have to :laughing:

children never realise what it is to be a child, until they grow up. think about it.

i made no assertions about sharecroppers.

not you, apparently.

you do not seem to know what collectivism is, much less capitalism.

if im wrong, feel free to define them for me.

this is a feature of collectivist socialist economies, not capitalist ones.

it sounds like you agree with me, that separating economy and state is the best way.

once again, a feature not of capitalism, but of collectivist economies.

im glad we can agree that government influence in the economy is harmful.
:smiley:

now, you just have to muster the courage to see that your own beliefs are inconsistent with themselves, and discover your own truths in the matter… but feel free to take your time on that one, im not holding my breath.

:banana-dance:

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The principle of efficiency is an important concept that we hear about primarily when we hear that “the market is efficient”. I think that in terms of the stock market this implies that there exists transparency and everyone has the same information. In the matter of morality it is often used to illuminate the concept of distribution as it relates to matters of justice.

kelvin