The fresh smell of coffee...the softness of a kitten...the efficiency of the economy. Yes, one of the great joys in life, economic efficiency is when the economy’s social media status says “resources are being used to their maximum potential,” which means minimized waste. What a thing of beauty, eh?
In a more tangible sense, goods and services are produced with minimized costs. When things are being produced as efficiently as possible, it means inputs are fulfilling their largest potential, and workers are being worked to their utmost capacity (which, in reality, is when they’re not over-worked and well-rested, mind you…though it’s up for debate whether the numbers take that into account). Another way to look at it is by looking at the waste, which economists call “loss,” or sometimes “deadweight loss” in its full form, which is when things aren’t efficient.
Economic efficiency, like “economic” anything, takes into account not just explicit costs and benefits (that have $ assigned to them), but also implicit costs and benefits (which don’t have a price put on them...but economists put prices on them anyway, to make things easier). In other words, economic efficiency doesn’t just refer to goods and services that firms make, but also things like the labor market and society.
For instance, discrimination in the labor market can create labor market inefficiency, and a negative externality like pollution can create a social cost, or deadweight loss. Because economists, unlike accountants, take everything into account.
Ironic, isn’t it?
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Finance: What is Efficient Markets Theor...141 Views
Finance a la shmoop what is the efficient markets theory well
there should just be a big picture of Warren Buffett right here it should be [Two men carrying a framed picture of Warren Buffett]
the man Warren explaining the efficient market theory himself and that theory
states that it's impossible to beat the market over a sustained period of time
it should be Warren Buffett who explains that all relevant information comes [Warren Buffett giving a presentation on stage]
public in public stocks and that the market more or less immediately
incorporates all that information in its pricing
hence nobody can ever beat the market over a long period of time so why should [Men falling asleep during a presentation]
Warren Buffett be giving this little definition because the efficient market
theory is wrong Buffett has beaten the market for decades in a row in every way [Warren Buffett beating up the market with a stick]
shape and form so you have a really memorable huge figure in finance this
guy and then pipsqueak professors who are kind of a laughing stock whenever the [Professor jumping on the microphone stand trying to talk]
wealthy power crowds gather in Omaha for their National Convention that's what
they say at the Woodstock of Finance if you will fortunately most people keep [Man with arms folded standing naked in a corridor]
their clothes on for this one