Current Issues Exercise
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More for Less? Debates over Efficiency
by Mark Lovewell
Efficiency might seem a straightforward concept, but it has many contentious aspects. For example, two
Canadian commentators come to quite different conclusions concerning efficiency and its relevance.
Political scientist Janice Gross Stein provides a skeptical view, pointing out efficiency's possible misuses,
while philosopher Joseph Heath gives a more sympathetic treatment, arguing that Canada's stress on
efficiency is one of the country's strengths. By studying their divergent perspectives, we can better
understand efficiency and its significance.
Efficiency has two related meanings, and it is important to determine which meaning is implied whenever
the term is used. Recall that economic efficiency, introduced in Chapter 1 of the text, is defined as gaining
the highest benefit from scarce resources. When economists refer to efficiency, this is usually what they
mean. Keep in mind that economic efficiency requires agreeing on what is the most beneficial result.
Productive efficiency, introduced in Chapter 4, means producing a given quantity of output at the lowest
cost. This is usually what non-economists are referring to when they use the term. It is a concept that is
usually easier to measure than economic efficiency.
Janice Gross Stein
In her recent book The Cult of Efficiency, Janice Gross Stein highlights productive efficiency, which she
argues is best viewed not as a goal, but rather as an instrument:
Efficiency is not an end, but a means to achieve valued ends. It is not a goal, but an
instrument to achieve other goals. It is not a value, but a way to achieve other values. It
is part of the story but never the whole. When it is used as an end in itself, as a value in
its own right, and as the overriding goal in public life, it becomes a cult.1
Elevating productive efficiency to an ultimate goal can lead to serious distortions, says Stein, who takes
the examples of education and health care. Because private markets cannot adequately provide either of
these goods to all citizens, each good has some of the properties of public goods, as introduced in Chaptet
7. In Canada, both education (at least up to the end of high school) and health care (excluding such
things as prescription drugs and dental services) are provided by governments as a basic right. Stein
looks at efficiency-related arguments that would modify the ways both these goods are delivered.
Education
Should governments fund vouchers that can be spent at private schools? Supporters of such plans argue
vouchers would give students more choice, enhancing both the quality and efficiency of education.
Looking at experimental voucher systems in some US cities, Stein concludes there is no overriding
evidence that vouchers enhance either educational quality or efficiency. Vouchers may help low-income
families escape deficient inner-city public schools, but this occurs only when vouchers include an incomecutoff, so that they are restricted to low-income families. Otherwise, vouchers primarily benefit highincome families who already use private schools.
Though little objective evidence exists that vouchers enhance educational quality, parents who use
vouchers tend to believe they do. For this reason, Stein argues, there is likely to be growing pressure to
introduce experimental voucher programs in Canada in the near future.
Health Care
Some Canadian commentators propose provincially funded medical authorities should purchase health
care services from private firms on behalf of each province's residents, while general practitioners should
use tax dollars to do the same thing for their own patients. Stein looks at existing experiments with these
sorts of publicly funded market systems in Great Britain and New Zealand. Again, she concludes there is
little evidence these program lead to greater health care quality or efficiency. Those programs specifically
geared to cost-cutting mean patients have less choice of health care alternatives than they would
otherwise have. As with vouchers in education, Stein sees the promise of higher efficiency brought about
by the participation of the private sector in health care as mostly illusory. But, despite the limited
prospects of success, these new arrangements may nonetheless be introduced in Canada.
'The Cult of Efficiency'
Stein's critique of efficiency goes far beyond the way the concept is used in current debates over
education and health care. She questions some of the underlying assumptions that economists use in
highlighting various forms of efficiency. In particular, she is skeptical about whether individuals make
everyday choices in the rational fashion assumed in economics:
If I have to choose between two hotels for my vacation, I will rank my preferences,
compare the likely costs and benefits of each of the hotels, and then rationally choose
the one that is most likely to best increase my satisfaction. Even if few of us actually
make our choices in this way (and most of us don't), it is this picture of the rational
decision-maker that is at the core of market dynamics, and increasingly, of our
explanations of public choice as well.2
It is this unwarranted view of rational decision-making by private individuals that Stein says is behind the
'cult of efficiency'. According to her, this obsession with productive efficiency can all too easily lead to bad
public policy.
Joseph Heath
Unlike Stein, Joseph Heath does not see the pursuit of efficiency as a misplaced obsession. In his book
The Efficient Society, he focuses on economic efficiency, highlighting a version known as Pareto efficiency,
which is the notion that any action should be taken when it makes at least one person better off without
harming others.
Pareto efficiency assumes individuals should maximize their own utility as long as this does not interfere
with the utility of others. Heath suggests that this view of efficiency has become the main guiding principle
of public policy in Canada. "Efficiency is a value," he boldly states. "And whether we realize it or not, it is
the central value in Canadian society."3
This leads him to argue that Canada is one of the world's most efficiency-conscious countries — much
more so, for example, than the US. Americans often choose liberty over efficiency, says Heath, which is
why they are willing to enact gun laws that lead to much higher levels of violent crime than in Canada.
This stress on liberty also means Americans tolerate a mix of private and public-funded health care that is
much more expensive than Canada's as a percentage of GDP, yet gives unacceptably narrow coverage to
American citizens.
Based on Heath's argument, Americans' suspicion of government has reduced their economic efficiency,
properly defined, as well as their overall quality of life. This is why Canada consistently outranks the US in
the annual calculations of the United Nations Development Program's Human Development Index
(introduced in the article on Mahbub ul Haq at the end of Chapter 8), even though Canadian per capita
GDP is significantly lower than in the US. It is Canada's particular mix of public and private sectors, says
Heath, that allows each sector to do what it does best. And it is this mix that makes the country so
efficient.
Efficiency as a Value
According to Heath, the fact that Canadians have made economic efficiency their guiding value is
something to be proud of:
Efficiency is not necessarily a cold, calculating virtue nor is it merely a mask for selfinterest. Efficiency is a noble, humanistic value intimately related to a number of other
values that we hold dear, such as cultural diversity, respect for individual rights, and the
alleviation of suffering. Rather than trying to conceal our commitment to efficiency, we
should pin it to our sleeves.4
Given the extent to which Canadians sometimes question their own society and its accomplishments,
especially in relation to our southern neighbour, Heath's perspective is one that deserves close scrutiny.
Notes
1.
2.
3.
4.
Janice Gross Stein, The Cult of Efficiency (Toronto: Anansi, 2001), p. 6.
Ibid, p. 30.
Joseph Heath, The Efficient Society (Toronto: Penguin, 2001), p. xviii.
Ibid, p. xviii.
If directed to do so by your instructor, the following questions can be answered online and emailed to
him/her or yourself.
1 Why do voucher systems lead to higher levels of parent satisfaction in their children's education,
despite the lack of evidence that educational quality is increased by vouchers?
Critics of Canada's publicly funded medicare system argue that free health care, available to all
2 Canadian
citizens, is inefficient.
a. Outline some of the arguments that these commentators make, concentrating on productive
efficiency.
b. Would it be possible for programs that increase productive efficiency in the delivery of health to also
reduce economic efficiency? Explain.
a. Why does the American right to bear firearms, such as handguns, go against the principle of Pareto
3 efficiency?
b. What are the efficiency benefits of the tighter gun control laws found in Canada?
4
a. Though the average quality of life may be higher in Canada than in the US, some highly skilled
Canadians choose to emigrate south of the border. Why?
b. Is this 'brain drain' of highly skilled workers a potential cost to the Canadian economy?