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Middle English, from Middle French or Latin; Middle French, from Latin efficient-, efficiens, from present participle of efficere - f. ex out + facere -to make.]


  • 1 : being or involving the immediate agent in producing an effect <the efficient action of heat in changing water to steam>
  • 2 : productive of desired effects; especially : productive without waste <an efficient worker>


Economic efficiency is used to refer to a number of related concepts. It is the using of resources in such a way as to maximize the production of goods and services. One economic system is more efficient than another (in relative terms) if it can provide more goods and services for society without using more resources. In absolute terms, a system can be called economically efficient if:

  • No one can be made better off without making someone else worse off.
  • More output cannot be obtained without increasing the amount of inputs.
  • Production proceeds at the lowest possible per-unit cost.

These definitions of absolute efficiency are not equivalent, but they are all encompassed by the idea that nothing more can be achieved given the resources available.

There are two main strains in economic thought on economic efficiency, which respectively emphasize the distortions created by governments (and reduced by decreasing government involvement) and the distortions created by markets (and reduced by increasing government involvement). These are at times competing, at times complementary – either debating the overall level of government involvement, or the effects of specific government involvement. Broadly speaking, this dialog is referred to as Economic liberalism or neoliberalism, though these terms are also used more narrowly to refer to particular views, especially advocating laissez faire.

Further, there are differences in views on microeconomic versus macroeconomic efficiency, some advocating a greater role for government in one sphere or the other.[1]