When is there inefficiency in an economy

Efficiency, effectiveness

The terms efficiency and effectiveness are initially used interchangeably. They are derived from the Latin efficientia (= effectiveness). In economics, however, the two terms have different meanings: If things are done economically correctly (profitability), it is a question of efficiency; (Efficient = doing things right = economical).
In contrast, the question of whether the right things are being done is a question of effectiveness (effective = doing the right things = strategically). The efficiency emphasizes the economic side of the use of resources, the effectiveness the operational side.

Another distinction is: Do we do things right = operationally, do we do the right things = strategically.


It would be better:


Economics. Economic use of a given situation; the economic principle is implemented in efficient decisions.

Efficiency (“do the things right”) measures the ratio of current output to current input and, among other things, represents a guideline for short-term planning. It is the effectiveness of structures and activities.

Examines the official act in terms of its performance. The focus is on how certain goals can be achieved without explicitly questioning the goals. The efficiency assessment thus pursues a rather short-term perspective geared towards direct activities. Or to put it another way: Efficiency means doing things right.

requires not only effectiveness but also economy (see economic principle). If it is valued in a commercial way, one speaks of profitability.

In the health industry:

Term that aims to assess whether a measure, an activity or a process is suitable for achieving a given goal with regard to certain assessment criteria. It is therefore an assessment criterion for the way in which the goal is achieved.

Cost efficiency can be mentioned as an example: Here, costs are the assessment criterion. The question is whether a goal, such as a treatment goal, can be achieved cost-effectively with the selected therapy, i.e. at lower costs than with other therapies.

Efficiency is differentiated from effectiveness. If a measure is not effective (i.e. not or poorly suited to achieving the specified goal), it cannot in principle be efficient either, because this already lacks the possibility of achieving the goal as a basic requirement for efficiency. However, even in health economics, where effectiveness and efficiency play a major role, there are hardly any undisputed and clear scales for the degree of target achievement.

In the health industry: (efficiency)

Efficiency is a term in economic theory and describes the benefit in relation to the costs of a measure. In health care, the efficiency of care services means that they are either provided with a minimum of costs or that a maximum of care or health can be achieved for a given cost (budget).

In statutory health insurance, the cost-effectiveness principle is intended to ensure the efficiency of care. The service providers are obliged to choose the most cost-effective alternative from several equivalent treatment options based on the entire treatment process.

In economic sociology: Effectiveness - Efficiency

1. Property of an estimator. 2. As a concept of economic theory, efficiency derives its meaning from the facts of scarcity. The term is used in different meanings. Technical efficiency is the state in which no production factors are wasted. It does not exist, for example, if the stoker continues to ride on the diesel locomotive. Economic efficiency in the sense of microeconomics exists when the minimum cost combination is realized, i.e. a given product quantity is manufactured at the lowest possible cost, taking into account the factor prices (economic principle). Economic efficiency in this sense presupposes technical efficiency, but the reverse is not true. Economic efficiency in the (total analytical) sense of welfare economics is given when the Pareto optimum is realized: an individual can then only achieve an increase in welfare at the expense of another individual. In this case, the production and the exchange optimum - for each of which separate efficiency terms are used - are present at the same time (efficiency rules). Literature: Sohmen, E., Allocation Theory and Economic Policy, Tübingen 1976.

(general definition) represents the degree of productivity of the resource use. The ratio of result (output) to the means used (input) is determined. According to the principle of economic efficiency, the aim is to minimize the input for a given output or to maximize the output for a given input. Typical measures are productivity, profitability or the costs incurred in relation to the output achieved.

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