Information and Efficiency:Another Viewpoint
The importance of bringing economic analysis to bear on the problems of efficient economic organization hardly requires comment, but there is a need to review the manner in which the notion of efficiency is used in these problems. The concept of efficiency has been abused frequently because of the particular approach used by many analysts. My aim is to examine the mistakes and the vagueness associated with this approach. I shall focus attention on the problem of efficiently allocating resources to the production of information because in this case the issues stand out clearly. Since Kenneth J. Arrow’s paper ‘Economic Welfare and the Allocation of Resources for Invention’1 has been most influential in establishing the dominant viewpoint about this subject, my commentary necessarily is a critique of Arrow’s analysis.
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