Efficiency is a key goal of economic policy - but is it enough?
Economics defines efficiency in a very formal fashion. An economic system is considered optimally efficient when no alternative allocation of resources exists that would not involve a lower level of total production. Efficiency is thus concerned with producing the maximum output for any given level of input.
Achieving this efficiency is, in standard economic theory, presumed to come from the operation of a freely competitive market in which individual households and enterprises make innumerable choices in pursuit of their particular interests.
(It doesn‘t in fact require that all these actors should be entirely rational, or even that they are seeking to maximise anything: what matters is the idea that, within the system as a whole, it is the individuals that hunt for the ’best' outcomes, rather than there being some agency with an overview that tries to find the best outcomes.)
From this perspective, London is already economically efficient, and the various economic sectors and jobs and businesses that are based here exist because they are indeed efficient. Less efficient businesses will be driven out by more efficient businesses; less efficient sectors will be squeezed out by more efficient sectors.
The policy approach to this situation has been largely stable for at least thirty years: it has been to acknowledge that there are ‘downsides’ to or losers from this process, and that it is a socio-political project to prioritise which if any of these issues warrant attention at any particular time.
Unemployment, for example, may or may not be considered important: and, if it is, there is only one method for dealing with it, and this is to ‘train’ (or offer training) so that unemployed people are better quipped (in the future) to compete for whichever jobs the market happens to generate.
Similarly, child poverty may or may not be considered important and, if it is, the solution is to have redistributive taxation arrangements, or publicly-funded support programmes. In neither case is it considered that the ‘efficient’ operation of the economy is the cause of the problem; and that the solution to the problem might thus be to influence the operation of the economic system itself.
Orthodox economics rebuts any and all arguments to this effect - whether to do with social or environmental outcomes that are judged (by society as a whole or by some smaller interest group) as ‘bad’ - on efficiency grounds: to interfere in the operation of the market is to reduce efficiency and thus not to get the ‘most’.
Given the scale and intractability of some of the problems facing London - endemic poverty, the persistent injustice, the scale of stress and mental ill-health caused by the vicissitudes of turbo-capitalism, the addiction to shopping, the extent of gambling and drug misuse (both illegal and prescription-based), the poor air quality, the poor housing, the volume of carbon emissions, the scale of debt - the primacy of ‘efficiency’ has surely to be challenged.
If we are to have, to build, a genuinely sustainable city for the twenty first century, we cannot carry on like this. To tackle the social and environmental challenges we face, we are going to have to re-think our economy. We are going to have to move from an economy based on ‘more’ to one based upon ‘enough’.
