II The Concept of 



Economic Efficiency: 



A THEORY OF EFFICIENT 

 RESOURCE ALLOCATION 



This study is rooted in the belief that a large measure of objective 

 analysis is possible, even in those areas of the water development 

 field where controversy has eroded the common ground for fruitful 

 discussion. But if a more dispassionate approach is to be accepted, 

 its rationale must be presented clearly and precisely. Therefore, 

 although this study is primarily concerned with specific problems 

 of evaluating alternative approaches to multiple purpose river 

 development, it must begin with a set of fundamental concepts of 

 a fairly general nature. The most important of these, for the 

 purpose of this book, is the concept of efficiency. 



Efficiency may be regarded as the relationship between the quan- 

 tity of input and the amoimt of resulting output. The larger the 

 output per unit of input, the greater the efficiency of a process. 

 This simple proposition, however, may not tell much in a practical 

 situation. For example, a garden plot may support peach trees, 

 rows of poppies, garden vegetables, guinea fowl, thistles, or an 

 environment to inspire poets. Output from the garden plot, 

 accordingly, may be defined in a nmuber of ways: a ton of thistle 

 per unit of plant nutrient, the luimbcr of vases of peach blossoms 

 per acre of land, and so on. Any other one or combination of 

 items of output per unit of any one or combination of inputs 

 could be used to define technical efficiency relationships. As 



15 



