 Retrospectives: X-EfficiencyJournal of Economic Perspectives, 2011, vol. 25, issue 4, 211-22 Abstract: In a 1966 article in the American Economic Review , Harvey Leibenstein introduced the concept of "X-efficiency": the gap between ideal allocative efficiency and actually existing efficiency. Leibenstein insisted that absent strong competitive pressure, firms are unlikely to use their resources efficiently, and he suggested that X-efficiency is pervasive. Leibenstein, of course, was attacking a fundamental economic assumption: that firms minimize costs. The X-efficiency article created a firestorm of criticism. At the forefront of Leibenstein's powerful critics was George Stigler, who was very protective of classical price theory. In terms of rhetorical success, Stigler's combination of brilliance and bluster mostly carried the day. While Leibenstein's response to Stigler was well reasoned, it never resonated with many economists, and Leibenstein remains undeservedly underappreciated. Leibenstein's challenge is as relevant today as it ever was. JEL-codes: B21 B31 D21 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:25:y:2011:i:4:p:211-22 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Economic Perspectives is currently edited by Enrico Moretti More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC. |
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