October 15, 2009

Economic Efficiency?

The problem with economic efficiency as defined by economists is its widespread interpretation as "maximiz[ing] the production of goods and services." This unfortunate phrase overlooks the physical limits to growth on a finite planet. It would be more efficient to optimize the production and consumption of goods and services.
The basic philosophy of classical economics offers a deeper definition of economic efficiency. The concept of value is the key concept, rather than maximum production or profit. And value is a qualitative, subjective, individual estimate. The economy - and all transactions - are based on all our individual estimates.
Since we are all human, we share similarities in our needs and wants, and thus in what is valuable to us. Needs have a higher priority than wants, and we have a variety of needs - physical, emotional, social, spiritual, etc.

The physical needs that pertain to our perceived need for fossil fuel energy are: clean air and water, healthy food, and snug shelter. Although we are used to paying money and using fossil fuel to meet these needs, all of these - money, fossil fuel, food, water, etc. - actually come from the planet.
The engineering efficiency of using fossil fuels to work for us is a ratio of output to input:
Useful Work (e.g., miles driven)
Fuel Used (e.g., gallons)

But this ratio distracts many people from looking at the big picture. A more useful ratio would be framed in terms of our true priorities:
Clean Air and Water, Healthy Food, and Snug Shelter
Resources: Sunshine and Planet Earth

Naturally, a healthy planet will be the most efficient way to meet our needs.

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