Economic Efficiency and the Distribution of Benefits from College Instruction

Abstract

Economic efficiency implies an equating, at the margin, of benefits and costs. In this paper we explore a concept of "efficiency" which is broader than the usual framework and which applies to commodities and services produced and distrib- uted largely outside the private, profit maximiz- ing sector. An assessment of the economic effi- ciency of producing such a commodity requires the determination of its outputs and the valuation or weighting of these outputs.' Our principal point is that these weights, in turn, depend on who receives the outputs; thus, distributional issues are at the heart of economic efficiency studies involving a wide range of activities undertaken in the governmental and private, nonprofit sectors.2 One of these activities-the production and dis- tribution of college instruction in economics- illustrates well the significance of this particular approach to the analysis of economic efficiency...