Yes, many economists use “efficiency” when they should admit they mean “good.”
However, I think you’ve misused “efficient” in much of this essay. Specifically, when you talk about an individual agent acting “efficiently,” you often just mean “rationally.” Example:
Abe did what was efficient for him, and Barry did what was efficient for him. And so if everyone does what’s efficient, how can that add up to inefficiency?
This is confused, because (as the definitions you cite show) efficiency is a property of states of affairs, not of actions.
Moreover, efficiency is only a well-defined concept when it’s made relative to constraints. If you remove all constraints, then obviously “whatever is, is efficient,” because things couldn’t have been different. But if you introduce constraints, then efficiency (and inefficiency) become meaningful.
A concept with very similar properties is that of optimality. Saying that a system is optimal (or not) only makes sense if it’s optimal relative to constraints.
Tossing a constraint out of the system and then not allowing the system to adjust is exactly how economists convinced themselves of inefficiency. They didn’t know about transaction costs but did realize that externalities shouldn’t exist in their absence, albeit not explicitly. They observed the reality of externalities and did not realize they were the result of the adjustment to the reality of transaction costs, so they concluded they were inefficient. Coase put that to rest in 1960.
It is necessary not to allow the system to adjust in order for it to be inefficient. In other words, it is necessary to not allow the system to obey the laws of economics.
Yes, many economists use “efficiency” when they should admit they mean “good.”
However, I think you’ve misused “efficient” in much of this essay. Specifically, when you talk about an individual agent acting “efficiently,” you often just mean “rationally.” Example:
This is confused, because (as the definitions you cite show) efficiency is a property of states of affairs, not of actions.
Moreover, efficiency is only a well-defined concept when it’s made relative to constraints. If you remove all constraints, then obviously “whatever is, is efficient,” because things couldn’t have been different. But if you introduce constraints, then efficiency (and inefficiency) become meaningful.
A concept with very similar properties is that of optimality. Saying that a system is optimal (or not) only makes sense if it’s optimal relative to constraints.
Tossing a constraint out of the system and then not allowing the system to adjust is exactly how economists convinced themselves of inefficiency. They didn’t know about transaction costs but did realize that externalities shouldn’t exist in their absence, albeit not explicitly. They observed the reality of externalities and did not realize they were the result of the adjustment to the reality of transaction costs, so they concluded they were inefficient. Coase put that to rest in 1960.
It is necessary not to allow the system to adjust in order for it to be inefficient. In other words, it is necessary to not allow the system to obey the laws of economics.