Michael Smith wrote: > That makes sense. It's like an airline. They've got the planes > (== classrooms). They have certain costs and expectations > of profitability -- less in the case of the Credentialling > Sector, which increasingly depends upon casual labor, and > doesn't have to keep Wall Street happy. But in either case, > they've got to sell the seats in order to keep flying. > > Efficiency == filling the seats you've already > bought. Growth == buying more seats to fill.
The word "efficiency" has a bunch of different meanings. For business, it's pretty much the same as private profitability, ignoring costs and benefits to others (the way sociopaths do). Economists of the free-market ilk often fall into this usage, making assertions such as "businesses are more efficient than government agencies" -- because they ignore the dumping of pollution and other "negative externalities" on others and the inadequate production of beneficial externalities by profit-seeking businesses. (Public agencies are supposed to serve different purposes than businesses do.) More generally, I'd see "efficiency" as referring to the maximum attainment of one's goals for a given cost. Alternatively, that could be seen as the attainment of one's goals for the minimum cost. These goals could be realizing profits (as in the previous paragraph) or winning a battle using strategic bombing or improving human health. "Efficiency" shows up in different ways in different contexts, but it refers to successful goal attainment. A not-for-profit university's goal might be to balance its budget (minimum costs) for a given number of students, a given standard tuition per student, and given earnings from the endowment (while contributing to reserve funds in a prudent way). (That's a simplified version of what I observed when I was on the budget committee.) Using price discrimination (financial aid) to fill the seats fits with this goal. The "official" definition of efficiency among economists involves "Pareto optimality": the economy -- or the operations of some sub-sector such as an individual business -- cannot make any individual better off without making someone worse off. This seems to exist only in a utopian (or dystopian,[*] depending on one's perspective) setting such as the Walrasian general equilibrium model. However, many economists assume that the real-world system in effect fits this ideal, except for the sector being considered, so that any micro-level Pareto improvement is a movement toward Pareto optimality. Thus, the case of giving a scholarship to a student who can't afford to go the university gives that student an extra benefit while not hurting the university and its stakeholders (since the tuition is above the cost per student) is a Pareto improvement, as I tried to explain with all those Xs and Ys. The case of "better living through price discrimination" is actually a microeconomic example of the "theory of the second best" (something that's usually not taught to undergraduates, because it would just confuse them). Price discrimination is supposed to be a good thing (a Pareto improvement) only given the assumption that monopoly power cannot be abolished (so we can't attain the Walrasian ideal). -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. [*] Firefox's spelling dictionary suggested "Ethiopian" to replace "dystopian." Is that an editorial comment? _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
