Lindblom - The Market System - Afghan Journalists' Committee

124 What To Make of Itharder questions: Is a market system efficient whether it isefficient in making people happy or, say, perversely efficientin elite exploitation of the population?Let us begin with the usual or conventional efficiencyproblem—efficiency in producing goods and services.The Core Efficiency ProblemJust as you cannot appreciate the accomplishment of climbingEverest unless you know that it is a bitterly cold ascentin oxygen-thin air, you cannot understand the distinctiveattributes of the market system bearing on efficiency withoutfirst understanding the obstacles to it. Just what arethey?By the laws of thermodynamics, input and output are alwaysequal. In that sense, all physical transformations areconsequently equally efficient, all at 100 percent. Electricpower that goes into a factory comes out not only in theform of a desired product but in heat discharged into the atmosphereand in waste products hauled away.The relevant concept of efficiency, however, is the ratioof valued outputs to valued inputs. Forget the 100 percentrelation between all the outputs (both usable heat and heatlost up the flue) and all the inputs (both oil and air) that heatyour living quarters. Relevant efficiency means a high ratioof valuable usable heat to the valuable oil input.It is not necessarily inefficient to use a ton of some inputto produce a pound of output. It depends on how that tonand that pound are valued. Physical properties of goods andservices tell us nothing about efficiency—there is no way toinfer efficient choice from those properties. No set ofchoices can be called correct, right, or efficient except byreference to how they are valued.