Efficiency is the often measurable ability to avoid wasting
material
Material is a substance or mixture of substances that constitutes an object. Materials can be pure or impure, living or non-living matter. Materials can be classified on the basis of their physical and chemical properties, or on their geolo ...
s, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully, and without waste.
In more mathematical or scientific terms, it signifies the level of performance that uses the least amount of inputs to achieve the highest amount of output. It often specifically comprises the capability of a specific application of effort to produce a specific outcome with a minimum amount or quantity of waste, expense, or unnecessary effort. Efficiency refers to very different inputs and outputs in different fields and industries. In 2019, the
European Commission
The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body ...
said: "Resource efficiency means using the Earth's limited resources in a sustainable manner while minimising impacts on the environment. It allows us to create more with less and to deliver greater value with less input."
Writer Deborah Stone notes that efficiency is "not a goal in itself. It is not something we want for its own sake, but rather because it helps us attain more of the things we value."
Efficiency and effectiveness
Efficiency is very often confused with
effectiveness
Effectiveness is the capability of producing a desired result or the ability to produce desired output. When something is deemed effective, it means it has an intended or expected outcome, or produces a deep, vivid impression.
Etymology
The ori ...
. In general, efficiency is a measurable concept, quantitatively determined by the
ratio
In mathematics, a ratio shows how many times one number contains another. For example, if there are eight oranges and six lemons in a bowl of fruit, then the ratio of oranges to lemons is eight to six (that is, 8:6, which is equivalent to the ...
of useful output to total useful input. Effectiveness is the simpler concept of being able to achieve a desired result, which can be expressed quantitatively but does not usually require more complicated mathematics than addition. Efficiency can often be expressed as a percentage of the result that could ideally be expected, for example if no energy were lost due to friction or other causes, in which case 100% of fuel or other input would be used to produce the desired result. In some cases efficiency can be indirectly quantified with a non-percentage value, e.g.
specific impulse
Specific impulse (usually abbreviated ) is a measure of how efficiently a reaction mass engine (a rocket using propellant or a jet engine using fuel) creates thrust. For engines whose reaction mass is only the fuel they carry, specific impulse is ...
.
A common but confusing way of distinguishing between efficiency and effectiveness is the saying "Efficiency is doing things right, while effectiveness is doing the right things". This saying indirectly emphasizes that the selection of objectives of a production process is just as important as the quality of that process. This saying popular in business, however, obscures the more common sense of "effectiveness", which would/should produce the following mnemonic: "Efficiency is doing things right; effectiveness is getting things done". This makes it clear that effectiveness, for example large production numbers, can also be achieved through inefficient processes if, for example, workers are willing or used to working longer hours or with greater physical effort than in other companies or countries or if they can be forced to do so. Similarly, a company can achieve effectiveness, for example large production numbers, through inefficient processes if it can afford to use more energy per product, for example if energy prices or labor costs or both are lower than for its competitors.
Inefficiency
Inefficiency is the absence of efficiency. Kinds of inefficieny include:
*
Allocative inefficiency refers to a situation in which the distribution of resources between alternatives does not fit with consumer taste (perceptions of costs and benefits). For example, a company may have the lowest costs in "productive" terms, but the result may be inefficient in allocative terms because the "true" or
social cost
Social cost in neoclassical economics is the sum of the private costs resulting from a transaction and the costs imposed on the consumers as a consequence of being exposed to the transaction for which they are not compensated or charged. In other w ...
exceeds the price that consumers are willing to pay for an extra unit of the product. This is true, for example, if the firm produces pollution (see also
external cost
In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...
). Consumers would prefer that the firm and its competitors produce less of the product and charge a higher price, to internalize the external cost.
*
Distributive inefficiency refers to the inefficient distribution of income and wealth within a society. Decreasing
marginal utilities of wealth, in theory, suggests that more egalitarian distributions of wealth are more efficient than inegalitarian distributions. Distributive inefficiency is often associated with
economic inequality
There are wide varieties of economic inequality, most notably income inequality measured using the distribution of income (the amount of money people are paid) and wealth inequality measured using the distribution of wealth (the amount of ...
.
*
Economic inefficiency refers to a situation where "we could be doing a better job," i.e., attaining our goals at lower cost. It is the opposite of economic efficiency. In the latter case, there is no way to do a better job, given the available resources and technology. Sometimes, this type of economic efficiency is referred to as the Koopmans efficiency.
Sickles, R., & Zelenyuk, V. (2019). Measurement of Productivity and Efficiency: Theory and Practice. Cambridge: Cambridge University Press. doi:10.1017/9781139565981
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*Keynesian
Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output ...
inefficiency might be defined as incomplete use of resources (labor, capital goods, natural resources, etc.) because of inadequate aggregate demand. We are not attaining potential output, while suffering from cyclical unemployment. We could do a better job if we applied deficit spending or expansionary monetary policy
Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often ...
.
* Pareto inefficiency is a situation in which one person can not be made better off without making anyone else worse off. In practice, this criterion is difficult to apply in a constantly changing world, so many emphasize Kaldor-Hicks efficiency and inefficiency: a situation is inefficient if someone can be made better off even after compensating those made worse off, regardless of whether the compensation actually occurs.
* Productive inefficiency says that we could produce the given output at a lower cost—or could produce more output for a given cost. For example, a company that is inefficient will have higher operating costs and will be at a competitive disadvantage (or have lower profits than other firms in the market). See Sickles and Zelenyuk (2019, Chapter 3) for more extensive discussions.
*Resource-market inefficiency refers to barriers that prevent full adjustment of resource markets, so that resources are either unused or misused. For example, structural unemployment
Structural unemployment is a form of involuntary unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers (also known as the skills gap). Structural unemployment i ...
results from barriers of mobility in labor markets which prevent workers from moving to places and occupations where there are job vacancies. Thus, unemployed workers can co-exist with unfilled job vacancies.
* X-inefficiency refers to inefficiency in the "black box" of production, connecting inputs to outputs. This type of inefficiency says that we could be organizing people or production processes more effectively. Often problems of "morale" or "bureaucratic inertia
Bureaucratic inertia is the supposed inevitable tendency of bureaucratic organizations to perpetuate the established procedures and modes, even if they are counterproductive and/or diametrically opposed to established organizational goals. This unc ...
" cause X-inefficiency.
Productive inefficiency, resource-market inefficiency, and X-inefficiency might be analyzed using data envelopment analysis and similar methods.
Mathematical expression
Efficiency is often measured as the ratio of useful output to total input, which can be expressed with the mathematical formula ''r''=''P''/''C'', where ''P'' is the amount of useful output ("product") produced per the amount ''C'' ("cost") of resources consumed. This may correspond to a percentage if products and consumables
Consumables (also known as consumable goods, non-durable goods, or soft goods) are goods that are intended to be consumed. People have, for example, always consumed food and water. Consumables are in contrast to durable goods. Disposable products ...
are quantified in compatible units, and if consumables are transformed into products via a conservative process. For example, in the analysis of the energy conversion efficiency of heat engines in thermodynamics
Thermodynamics is a branch of physics that deals with heat, work, and temperature, and their relation to energy, entropy, and the physical properties of matter and radiation. The behavior of these quantities is governed by the four laws o ...
, the product ''P'' may be the amount of useful work output, while the consumable ''C'' is the amount of high-temperature heat input. Due to the conservation of energy
In physics and chemistry, the law of conservation of energy states that the total energy of an isolated system remains constant; it is said to be ''conserved'' over time. This law, first proposed and tested by Émilie du Châtelet, means tha ...
, ''P'' can never be greater than ''C'', and so the efficiency ''r'' is never greater than 100% (and in fact must be even less at finite temperatures).
In science and technology
In physics
* Useful work per quantity of energy, mechanical advantage over ideal mechanical advantage, often denoted by the Greek lowercase letter η (Eta
Eta (uppercase , lowercase ; grc, ἦτα ''ē̂ta'' or ell, ήτα ''ita'' ) is the seventh letter of the Greek alphabet, representing the close front unrounded vowel . Originally denoting the voiceless glottal fricative in most dialects, ...
):
** Electrical efficiency
The efficiency of a system in electronics and electrical engineering is defined as useful power output divided by the total electrical power consumed (a fractional expression), typically denoted by the Greek small letter eta (η – ήτα).
: ...
** Energy conversion efficiency
** Mechanical efficiency
** Thermal efficiency
In thermodynamics, the thermal efficiency (\eta_) is a dimensionless performance measure of a device that uses thermal energy, such as an internal combustion engine, steam turbine, steam engine, boiler, furnace, refrigerator, ACs etc.
For a ...
, ratio of work done to thermal energy consumed
* Efficient energy use
Efficient energy use, sometimes simply called energy efficiency, is the process of reducing the amount of energy required to provide products and services. For example, insulating a building allows it to use less heating and cooling energy to ...
, the objective of maximising efficiency
** In thermodynamics:
*** Energy conversion efficiency, measure of second law thermodynamic loss
** Radiation efficiency, ratio of radiated power to power absorbed at the terminals of an antenna
** Volumetric efficiency Volumetric efficiency (VE) in internal combustion engine engineering is defined as the ratio of the mass density of the air-fuel mixture drawn into the cylinder at atmospheric pressure (during the intake stroke) to the mass density of the same volu ...
, in internal combustion engine design for the RAF
* Lift-to-drag ratio
* Faraday efficiency, electrolysis
* Quantum efficiency
The term quantum efficiency (QE) may apply to incident photon to converted electron (IPCE) ratio of a photosensitive device, or it may refer to the TMR effect of a Magnetic Tunnel Junction.
This article deals with the term as a measurement of ...
, a measure of sensitivity of a photosensitive device
* Grating efficiency, a generalization of the reflectance of a mirror, extended to a diffraction grating
In economics
* Productivity improving technologies
* Economic efficiency
In microeconomics, economic efficiency, depending on the context, is usually one of the following two related concepts:
* Allocative or Pareto efficiency: any changes made to assist one person would harm another.
* Productive efficiency: no ad ...
, the extent to which waste or other undesirable features are avoided
* Market efficiency, the extent to which a given market resembles the ideal of a
efficient market
** Pareto efficiency
Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engin ...
, a state of its being impossible to make one individual better off, without making any other individual worse off
** Kaldor-Hicks efficiency, a less stringent version of Pareto efficiency
** Allocative efficiency, the optimal distribution of goods
** Efficiency wages, paying workers more than the market rate for increased productivity
* Business efficiency
The efficiency ratio indicates the expenses as a percentage of revenue (''expenses'' / ''revenue''), with a few variations – it is essentially how much a corporation or individual spends to make a dollar; entities are supposed to attempt minimizi ...
, revenues relative to expenses, etc.
* Efficiency Movement, of the Progressive Era (1890–1932), advocated efficiency in the economy, society and government
In other sciences
* In computing:
** Algorithmic efficiency
In computer science, algorithmic efficiency is a property of an algorithm which relates to the amount of computational resources used by the algorithm. An algorithm must be analyzed to determine its resource usage, and the efficiency of an al ...
, optimizing the speed and memory requirements of a computer program.
** Storage efficiency, effectiveness of computer data storage
** Efficiency factor, in data communications
* Efficiency (statistics)
In statistics, efficiency is a measure of quality of an estimator, of an experimental design, or of a hypothesis testing procedure. Essentially, a more efficient estimator, needs fewer input data or observations than a less efficient one to ac ...
, a measure of desirability of an estimator
* Material efficiency, compares material requirements between construction projects or physical processes
* Administrative efficiency, measuring transparency within public authorities and simplicity of rules and procedures for citizens and businesses
* In biology:
** Photosynthetic efficiency
** Ecological efficiency
See also
* Jevons paradox
References
{{Authority control
Economic efficiency
Heat transfer
Engineering concepts
Waste management
Waste of resources