The ethics of efficiency

Introduction. Efficiency is generally regarded as a value-neutral concept, concerned with assessing whether an economy produces at its possibility frontier, that is, generating maximum possible market output with given resources. Efficiency analysis generally rejects concerns with distribution – often referred to as equity – which leads to the common understanding of efficiency and equity as being trade-offs. This is also the comprehension of the widely applied Pareto efficiency criterion. The efficiency/equity trade-off reflects the strong influence of positivism on economics, whereby efficiency is regarded as located on the ‘positive’ side of economic science, and equity – as expressed by social welfare functions, rights, equality of liberty, or other distributive concepts – on the ‘normative’ side (Putnam and Walsh, 2007)