What is {term}? Efficiency

Efficiency signifies a level of performance that describes using the least amount of input to achieve the highest amount of output. Efficiency refers to the use of all inputs in producing any given output, including personal time and energy. It is a measurable concept that can be determined using the ratio of useful output to total input. It minimizes the waste of resources such as physical materials, energy and time while accomplishing the desired output.

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Efficiency

BREAKING DOWN Efficiency

Economic efficiency refers to the optimization of resources to best serve each person in that economic state. There is no specific threshold that determines the efficiency of an economy, but indications include goods being produced at the lowest possible cost and labor performed with the greatest possible output.

Market efficiency reflects how accurately stock prices reflect all available information. Similarly, operational efficiency occurs when stock prices accurately reflect the costs of company operations.

Historical Techniques

Breakthroughs in efficiency have often coincided with the invention of new tools that contribute to labor. Early examples include inventions such as the wheel and the horse collar, which redistributes the weight on a horse's back so that the animal can carry large loads without being overburdened. Innovations such as steam engines and motor vehicles that emerged during the Industrial Revolution allowed people to move farther in shorter periods of time and contributed to efficiencies in travel and trade. The Industrial Revolution also introduced new sources of power such as fossil fuels, which were cheaper, more effective and more versatile.

Movements such as the Industrial Revolution also brought efficiency in time. For example, the factory system, in which each participant focuses on a specific task in the factory line, allowed operations to advance increasing output while saving time. Many scientists also developed practices to optimize specific task performance. A famous example in popular culture of the quest for efficiency is the biographical novel "Cheaper by the Dozen." Frank Bunker Gilbreth Jr., the co-author, develops systems to maximize efficiency in even the most mundane tasks, such as brushing your teeth.

The Impacts of Efficiency

An efficient society is better able to serve its citizens and function competitively. When goods are produced efficiently, they can be sold at a lower price. The advances that have occurred due to efficiency have facilitated higher standards of living, including homes with electricity, running water and the ability to travel. Efficiency reduces hunger and malnutrition because goods can be transported farther and quicker. In addition, advances in efficiency have allowed the work week to decline considerably. More work can now be performed in a shorter amount of time. 

Efficiency is an important attribute because all inputs are scarce. Time, money and raw materials are limited, and it is important to conserve them while maintaining an acceptable level of output.