Talk:X-inefficiency

Proposed merge with x-efficiency

Shouldn't this article be merged with x-efficiency? --132.180.196.111 (talk) 09:46, 19 October 2009 (UTC)

X-inefficiency is a standard term in economics. X-efficiency is the literal opposite of X-inefficiency, and has no unique content. If there isn't any objection within a week, I take that we've agreed on the merger and I'll go ahead with it. Ratibgreat (talk) 09:02, 22 June 2011 (UTC)

By the way, I've suggested that the X-efficiency article gets dropped and merges here. Ratibgreat (talk) 09:03, 22 June 2011 (UTC)

 Done Jonpatterns (talk) 20:01, 6 December 2017 (UTC)

can't maximise and minimise at the same time

You can't maximise and minimise at the same time, that makes no sense. the definition of maximisation is that you make one variable as large as possible while holding another one constant. thus firms do not maximise revenues and minimise costs, they maximise one given the other (basic A-level —Preceding unsigned comment added by 129.67.49.54 (talk • contribs)

economic profit

"Economic theory assumes that the management of firms act to maximize owners' wealth by minimizing risk and maximizing economic profits ... Thus firms earn zero economic profits"

What rubbish - if economic profits must be zero all a firm does is minimise risk!!! Economics assumes firms maximise profits and in a perfectly competive market this is achieved by producing the quantity where average and marginal costs are the same. Economic profits only apply in a monopoly where the firm also sets its price such that demand exactly equals the quantity defined above. It should also be pointed out that in economics the cost includes the opportunity cost of not investing the money elsewhere. The recovery of the oportunity cost is called the normal profit (otherwise to the layman it looks as though firms do not make any profit in a cperfectly competive market). —Preceding unsigned comment added by 78.86.42.198 (talk) 14:57, 2 May 2009 (UTC)

USPS

My apologies. It's a real paper, published by a WP:FRINGE organization. Although I agree more with them than with "mainstream" economics, it is clearly fringe. It's not a reliable source, except for the opinion of the author and the Foundation, which would not be sufficiently notable for the article. — Arthur Rubin (talk) 10:33, 29 January 2013 (UTC)

Reliable source and example removed

Here's what Rubin removed from this page.

The USPS is a classic example of X-inefficiency. While USPS must compete with private firms in package and urgent delivery services, its monopoly status in the areas where it does not face competition, such as nonurgent deliveries, seems to have made the USPS inefficient. Postage prices offer evidence of this inefficiency. While most goods tend to get cheaper in inflation-adjusted terms over time, the price of a first-class stamp rose by twice the rate of inflation from 1970 to 2010. - Matthew Mitchell, The Pathology of Privilege: The Economic Consequences of Government Favoritism

He offered an explanation for his removal of the content...but I have no idea what he is talking about. --Xerographica (talk) 21:26, 3 February 2013 (UTC)

• I looked up the reference Mitchell (the author of the quote) cites here, and he's taken it out of context. The sentence immediately prior to the one about the change in the price of a stamp is, "The USPS monopoly has suffered in recent years because of rising costs and growing competition from new technologies." The sentence immediately following it goes on to discuss, e.g., how long-distance calls, a possible substitute for mail, are much cheaper now than in 1970.

As for the source's reliability/neutrality, the center that Mitchell works for describes itself as, "the world’s premier university source for market-oriented ideas," and states that it, "works to advance knowledge about how markets work to improve our lives." —Fishicus (talk) 10:07, 4 February 2013 (UTC)

I'm not quite sure what your point is. What Mitchell is saying is not fundamentally different to what Milton Friedman says in this video...

The government should not help to save Chrysler, of course not. This is a private enterprise system. It's often described as a profit system but that's a misleading label. It's a profit and loss system. And the loss part is even more important than the profit because it's what gets rid of badly managed, poorly operated companies. When Chrysler loses money...it's got to do something. When Amtrak loses money it goes to congress and gets a bigger appropriation. [...] It's the stockholders of Exxon who ultimately are buying it. If they don't like what Exxon is doing with their money, they have a perfectly good alternative...they can sell the stock. And as the stock went down, if the stockholders didn't like it, they would pay somebody to change the policy which Exxon is following. We have a far greater degree of control over what Exxon does than we have over what a lot of our government corporations do. - Milton Friedman, What is Greed?

...which is not fundamentally different to what Thomas Sowell has argued...

A business with red ink on the bottom line knows that this cannot continue indefinitely, and that they have no choice but to change whatever they are doing that produces that red ink, for which there is little tolerance even in the short run, and which will be fatal to the whole enterprise in the long run. In short, financial losses are not merely informational feedback but consequential feedback which cannot be ignored, dismissed or spun rhetorically through verbal virtuosity. - Thomas Sowell, Intellectuals and Society

Obviously these are all market oriented economists. Therefore...? We can't include what they have to say about the topic? We should go around and remove any reliably sourced material that is market-oriented in nature? --Xerographica (talk) 10:24, 4 February 2013 (UTC)

I don't think Fishicus's reason for declaring the source not reliable is completely valid, but the quote is inappropriate, nonetheless. The quote is taken out of context sufficiently that the meaning is essentially destroyed, and it's a fringe source. I would not say that market-oriented concepts are fringe in economics, mearly minority; but that source is fringe. And it requires an expert opinion to determine that the quotes are related. Because of that, the expert who has that opinion has to be quoted. And your opinions don't meet this sentence from WP:SPS:

Self-published material may be acceptable when produced by an established expert on the topic of the article whose work in the relevant field has previously been published by reliable third-party publications.

— Arthur Rubin (talk) 14:55, 4 February 2013 (UTC)

What is X-inefficiency? --Xerographica (talk) 18:39, 4 February 2013 (UTC)

• What I meant in my last point about the reliability of this source in particular--not every market-oriented source--is illustrated by the fact that the source took the quote out of context. If you want to provide the full quote--in its full context--that's fine. —Fishicus (talk) 19:55, 4 February 2013 (UTC)

Nearly every quote that I provide in any context is removed...Talk:Entry_(economics) and Talk:Foot_voting and dozens of other articles. I think adding Mitchell's quote...as well as Friedman's and Sowell's would go a long way in helping people understand the concept... its relevance, importance and significance. --Xerographica (talk) 20:21, 4 February 2013 (UTC)

• I can't speak for what's happened to quotes on other pages, but keep in mind the following from WP:NPOV:

From Jimbo Wales, paraphrased from a September 2003 post on the WikiEN-l mailing list:

• If a viewpoint is in the majority, then it should be easy to substantiate it with reference to commonly accepted reference texts;
• If a viewpoint is held by a significant minority, then it should be easy to name prominent adherents;
• If a viewpoint is held by an extremely small (or vastly limited) minority, it does not belong in Wikipedia regardless of whether it is true or not and regardless of whether you can prove it or not, except perhaps in some ancillary article.

Also check WP:CCPOL for Wikipedia's Core Content Policies. —Fishicus (talk) 21:02, 4 February 2013 (UTC)

I'm not quite sure how that is relevant to whether passages by Mitchell, Friedman and Sowell should be included in an article on X-inefficiency. The free-market viewpoint certainly isn't the majority...but it most definitely is a significant minority with plenty of relevant and reliable sources. --Xerographica (talk) 21:10, 4 February 2013 (UTC)

• Quotes taken out of context such that they no longer have the same meaning as in the original source are not appropriate, per Wikipedia policy. If you would like to substitute a different source, feel free to do so. The links to Wikipedia's policies were to suggest possible explanations for why your quotes have been removed from other articles, since I don't know what quotes have been removed or why (though I don't think this is really the forum to discuss issues aside from the quote removed from this particular article). —Fishicus (talk) 21:51, 4 February 2013 (UTC)

I understand the concept of a quote being taken out of context...but that's only relevant when the "new" meaning is significantly different than the "intended" meaning. How is Mitchell's "new" meaning any different than Friedman's or Sowell's? They are all proponents of free-markets and as such they are all going to argue that all government organizations will suffer from X-inefficiency. That's simply because a government organization's revenue is determined by government planners... not by the actual demand (the demonstrated preference of millions of consumers). --Xerographica (talk) 22:11, 4 February 2013 (UTC)

• Brief example/analogy: If person A writes, "Thing X is bad but also good." Elsewhere, person B sees this and writes, "Thing X is bad, according to person A." What person B did would not be allowed on Wikipedia (or any other reputable source). What Mitchell has done is similar (though not exactly the same) to what person B did. The source he cites is not making the same argument that he is, although he makes it appear so by taking it out of context. If someone else has made the same argument, then it should be easy to replace Mitchell's quote with a quote from or reference to one of them. —Fishicus (talk) 09:23, 5 February 2013 (UTC)

But I don't see a disparity between Mitchell's quote and McEachern's section on the USPS...

Because its monopoly applies only to regular first-class mail, USPS has lost chunks of other business to private firms offering lower rates and better service. The United Parcel Service (UPS), for example, is more mechanized and more containerized than the USPS and thus has lower costs and less breakage. The USPS has tried to emulate UPS but with only limited success. After Hurricane Katrina, it took seven months to reopen the USPS processing and distribution center in New Orleans. Rivals UPS, FedEx, and DHL all restored service within three weeks. - William A. McEachern, Microeconomics: A Contemporary Introduction

Just like Mitchell...McEachern is clearly critiquing the USPS. But he does, in the very last paragraph, share the opposing side's viewpoint. It's great if you think that this article should share the opposing side's viewpoint...but that's what the criticism section is for. --Xerographica (talk) 10:04, 5 February 2013 (UTC)

• It might be useful to review the Fallacy of quoting out of context. McEachern attributed the cause of high inflation [edit: higher prices] to multiple factors, including the greatly decreased price of substitute services, increased production costs, and increased competition--none of which are due to inefficiency. Yet reading the quote from Mitchell, the reader is likely to infer that the only cause of the higher inflation [edit: prices] is inefficiency in the USPS. That is because he's taken the information from McEachern and used it out of context, and to use what Mitchell wrote would simply propagate this misconception. —Fishicus (talk) 05:00, 6 February 2013 (UTC)

Errr...the cause of inflation? You might need to look into that a bit. --Xerographica (talk) 08:08, 6 February 2013 (UTC)

• Sorry, I was using "inflation" in its colloquial rather than economic meaning. I've edited my prior comment to make it clear what I meant. — Fishicus (talk) 22:22, 6 February 2013 (UTC)

But why have the prices of related services decreased while the price of the first class stamp increased? For the UPS, the price = profit + cost...while for the USPS price = cost. "Efficiency" is simply doing more with less...which allows you to provide consumers more for less. McEachern is clearly arguing that prices for similar services lowered over time because those companies became more efficient. The USPS, on the other hand, did not become more efficient over time...as is clearly evident by the relative increase in the price of a first class stamp. --Xerographica (talk) 22:41, 6 February 2013 (UTC)

• You've greatly oversimplified and are projecting your own beliefs/opinions onto McEachern (he never even uses any form of the word "(in)efficiency"; while you may believe he's implying this, that's your inference, not a fact). It's also a mistake to make comparisons between industries because the inputs and thus costs may be entirely unrelated. E.g., the invention of the internet has dramatically decreased the cost of long-distance communication, allowing people to switch from using the USPS; however, this by no means says anything about the USPS. Or, e.g., if the cost of fuel increases, this will have a large effect on the USPS with their fleet of cars, trucks, and aircraft; yet it's likely to have a small or negligible effect on telecommunications. Again, this has nothing to do with the behavior or management of the USPS. We also don't use horse-drawn carriages to deliver mail anymore. A company that specializes in them may be as efficient as it's possible for such a company to be; still, the cost to use them would be phenomenally high.

Another major difference between USPS and other carriers is that the former has a legal obligation to deliver first-class mail to everyone in the country, regardless of geography. That means they're required to service even the most rural locations, regardless of the loss it incurs. However, private carriers have no such obligation and thus are able to refuse service to unprofitable regions.

These are only a few of the many potential reasons for the disparity that having little to do with efficiency. Regardless, why not use any of what I'm sure are many other examples in the literature which don't engender disagreement? —Fishicus (talk) 06:41, 7 February 2013 (UTC)

If we have such a widely divergent understanding of McEachern's section on the USPS...then the problem has absolutely nothing to do with the passages we select...and everything to do with the gaps in our own understanding of basic microeconomics. I posted his passage in the Economics project...Wikipedia_talk:WikiProject_Economics#McEachern_and_the_USPS...and asked other editors to share their views on his passage. --Xerographica (talk) 09:02, 7 February 2013 (UTC)

Can you explain why you disagree with my prior comment?

Also, I just noticed later in that chapter McEachern writes, "Changing technology also works against monopoly in the long run. For example, the railroad monopoly was erased by the interstate highway system. ... The U.S. Postal Service's monopoly on first-class mail is being eroded by fax machines, texting, Twittering, email, e-payments, and private firms offering overnight delivery." Even his comment on the railroad is virtually the same as the one I gave about horse-drawn carriages. —Fishicus (talk) 22:45, 7 February 2013 (UTC)

While randomly browsing Wiki policies, I came across another one that is particularly relevant here, WP:STICKTOSOURCE: "The only way you can show your edit is not original research is to cite a reliable published source that contains the same material. Even with well-sourced material, if you use it out of context, or to advance a position not directly and explicitly supported by the source, you are engaging in original research" [emphasis in the original]. A little further down the page, WP:SYN provides an additional example along these lines. These are relevant because McEachern does not directly and explicitly state anything about inefficiency. To use this word would be inserting one's own analysis/interpretation, or, as Wikipedia explains, engaging in original research. — Fishicus (talk) 11:21, 9 February 2013 (UTC)

Here's Mitchell's profile. You're the one who is disagreeing with his analysis of McEachern...you're the one who is saying that your understanding of McEachern is superior to Mitchell's. Therefore, if anybody is engaging in original research...it's you. I'm simply saying that I agree with Mitchell's understanding of McEachern.

If you think Mitchell is confused or mistaken about what exactly is X-inefficiency...then the burden is on you to share other economists who say that X-inefficiency is something else...something completely different. Mitchell says that X-inefficiency is "A" but five far more notable and respected economists say that X-inefficiency is "P". But without that evidence on hand...it's original research for you to allow Rubin to remove Mitchell's passage from this article.

I'd love to spend more time explaining the relevant concepts that lead me to agree with Mitchell's assessment...but right now my main priority is tagging the 1000+ economic passages in my database. At least this economic concept has some content. There are far more important economic concepts without any content. Sharing the relevant passages here on Wikipedia could potentially go a long way to helping other editors see the size of the gaps for themselves...as well as give them the material they need to fill the gaps in. --Xerographica (talk) 12:13, 9 February 2013 (UTC)

Maybe a way to include it may be to state the economist making the claim. Jonpatterns (talk) 20:02, 6 December 2017 (UTC)

Given the tone and content of the above remarks, it appears that Xerographica has been hired to go through 1000+ different WP articles on economics, and add some kind of political slant promoting one certain politico-economic theory over another. That's not neutral, that's large-scale point-of-view pushing on matters of significant political importance. 67.198.37.16 (talk) 02:31, 29 May 2018 (UTC)

“Leibenstein’s Inefficiency Disease”

Something anecdotal, quoted from a blog entry on medical care (in the US):

\[after long problem description\] "It’s obvious how to fix (this particular problem with) health care. Just make everything run systematically, like FedEx or Amazon. There are no technical or business obstacles to this. Anyone who understands IT and/or business can see how to do it.

"Back-of-envelope calculations say a working health care system would deliver dramatically better quality at 10-20% of the current cost.

"Health care is notionally a profit-driven free market. This looks like an easy opportunity to make trillions of dollars by making the world better for everyone. Why doesn’t someone do that?

"It appears that 73% of the labor cost of a health care organization is spent on trying to communicate with other health care organizations that have no defined interface.3 Patrick Collison has suggested calling this pattern “Leibenstein’s Inefficiency Disease,” by analogy to Baumol’s Cost Disease. An organization can’t improve the 73% by much on its own; that inefficiency is forced on it by the environment it operates in.

"Instead, organizations in sectors afflicted with inefficiency disease try to push their own administrative work outside. Both out into other organizations, and—more visibly—they force it onto you, the customer. It’s your job to fill out forms they could have done more efficiently themselves. When they screw up, you have to try to fix it. This negative externality could be called “paperwork pollution,” by analogy with negative externalities of smokestack industries.

See "Post-apocalyptic life in American health care" Yes, its a anecdotal blog entry, but it highlights an issue with X-inefficiency in free markets. Perhaps there is some reputable analysis published by someone in economics? (Or, dear lord, has the idea of economists who are trust-worthy broken down and been replaced by alt-facts in support of one or another political-economic theory?) 67.198.37.16 (talk) 02:21, 29 May 2018 (UTC)