Lindblom - The Market System - Afghan Journalists' Committee

What Efficiency Requires 125Suppose that, either through markets or through centralcommand, a society assigns valued inputs—labor, parts,machinery, and so on—to the manufacture of rubber boots.Production will be inefficient if the workers do not workhard enough or if they are badly organized. But if output israised through incentives and better organization—more ofthe same valued output is derived from the same valued input—wesee a clear gain in efficiency. Call this technologicalefficiency.But the society may be manufacturing the wrong output—thatis, output not valued or not greatly valued. Consumers,or their rulers, would rather have more electric hairdryers than more boots. Or, either through central planningor the market system, the society may assign to the factorykinds and amounts of labor, machinery, or parts that wouldbe more productive of value if manufacturing gardeningtools instead. The choice of efficient outputs and inputs is agreat and difficult challenge for any kind of society. It requiresappropriate choices of outputs and inputs in each enterprisein the chain that connects inputs—like coffeebeans to a cup of coffee served in a cafe. It also requires anefficient selection of enterprises—a trucking companywhere needed in the chain, or an insurance company whereneeded. Call this allocative efficiency.Through their market choices wealthy societies haveshifted their energies out of farming and heavy industryinto travel, insurance, and financial services. Their allocationswill continue to change. In developing countries, poorpeople spend some of their new income on bicycles. Then,as their incomes rise further, they reallocate their spendingfrom bicycles to motor scooters. And entrepreneurs endlesslymake choices between labor and machines, as well asmove capital investment from Oslo to South Korea. The al-