Last modified on April 15, 2007, at 18:56

Efficiency

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"Efficiency" is an economic term that implies optimal production/consumption of all goods.

Put another way, "efficiency" has zero waste.

Pareto efficiency defines the optimal state as one wherein no one can be made better off without someone being made worse off.

Kaldor-Hicks efficiency defines the optimal state as one wherein all marginal benefits divided by respective prices are equal. (That is, no transfer of production inputs between goods will achieve a better outcome.)