16 MULTIPLE PURPOSE RIVER DEVELOPMENT 



another example, consider a steam electric plant where the output 

 in a physical sense consists of a certain volume of stack gasses, some 

 smoke, ashes, exhaust heat, steam, and, of course, some electricity. 

 In speaking of thermal efficiency of steam electric stations, the 

 relationship is conventionally expressed as the heat rate (such as 

 9,000 Btu's per kilowatt-hour of electricity), and the proportion of 

 heat output (3,413 Btu's per kilowatt-hour) to total heat input, as 

 the per cent thermal efficiency. But there are other technical rela- 

 tionships. Under certain circumstances, it might be the better 

 part of economic wisdom to maximize output of exhaust steam 

 (thereby reducing the input of cooling water); then the desired 

 efficiency relationship would be expressed differently. Other tech- 

 nical relationships — as, for example, between output of electricity 

 and input of labor or capital — would have perfectly reasonable 

 efficiency measures involving inputs other than fuel. In short, given 

 the output to be maximized per unit of input (also given), the 

 input-output relationship for measuring technical efficiency can be 

 specified. Now this kind of relationship may be very useful as a 

 means of defining technical performance levels for analysis of 

 numerous engineering problems, but it does not convey directly 

 the concept of efficiency with which this study is concerned. 



The concept of economic efficiency for a free society must include 

 some notion of maximizing the output of those items most preferred 

 by the members of the community per unit of input of those 

 resources which are relatively the more scarce. That is, beginning 

 with the preferences of individuals making up a free society, our 

 concept of economic efficiency will require for any given resource 

 endowment and state of technological knowledge, the maximum 

 level of the preferred composition of output. The concept of 

 economic efficiency, therefore, does not ignore the problem of 

 technical efficiency. But it does require that an element of ration- 

 ality be employed in specifying what technical relationships are 

 most relevant for the purpose of providing those goods and services 

 relatively the more preferred by the community. 



Economic efficiency, accordingly, is defined as a situation in 

 which productive resources are so allocated among alternative 

 uses that any reshuffling from the pattern cannot improve any 

 individual's position and still leave all other individuals as well 

 off as before. Of course, any change in the pattern of resource 

 employment may improve the conditions of some people, but if 



