Efficiency
The Department of Government Efficiency (DOGE). Let me parse that, as an engineer. There is a Department, an organization whose function is to make all other Departments efficient. How efficient is it?
Well, we would have to define efficiency and to an engineer efficiency is a ratio of some measure divided by some measure. Power as energy per time, mobility as space per time or bandwidth as bits per time are all efficiencies.
Isn’t efficiency implying some evaluation of More for Less? Otherwise it could be tragedy. Then the measures are not just objective. The numerator is a thing wanted and the denominator an expense or cost endured to get the numerator thing. That gets beyond engineering into the tradeoffs of economics regarding our wants and the vexed question of trying to allocate and measure what we gain versus what we pay or sacrifice. And there is a social and ecological question of who is getting what and who is paying. That is the matter of distribution or equity.
There are particular forms, e.g. the “market” of negotiated contracts of exchange that suppress the efficiency and equity question simply by all participants being satisfied. We just cannot compare or commensurate who got what. We get equity and lose efficiency.
Then what about Government Efficiency? Some ill-defined, non-elected, not even civil-service authorized, gang wanted to get rid of some Government functions, people and expenses. That is an evaluation but an incommensurate set of measures. So make it simple: They just wanted to reduce the Federal budget expense. Why? To reduce taxes, but for whom? The equity issues gets dumped over on the Big Beautiful Budget, beautiful for those with the biggest tax cuts and entirely inequitable.
As far as the efficiency of the DOGE their targets were the civil employees somewhere between the 2% to 6% of the total Federal budget, depending on whether you count the large part of the civilian defense and veterans affairs staff and other “necessary” agencies (ICE?). In any case that target includes all the people who manage the honesty and efficiency of the other 94% to 98% of the budget as well as delivering a variety of outcomes that someone sometime—maybe Congress or even the Executive—thought were Good and worth the expense, hence efficient. I would say the DOGE had no definition of efficiency and achieved no efficiency beyond conducting its self-authorized constitutional coup.
The Efficiency of the State
DOGE is just a fish in a barrel as a target of ridicule. As someone asked in a letter to the Albany Paper: “What is wrong with reducing taxes?” It is what we all want but it is not an efficiency, just less of one thing (the State income) and perhaps more in the pockets of some people (unless they lost income from a State expenditure).
I worked in and around the Federal government almost all of my 40 year career. I often said, half jocularly, that you could get rid of half the Federal government, but the problem was: Which half? That is a matter of who thinks what is important when. Look at the military or emergency services. To say they are doing nothing of their intended function half the time would be generous.
All this is just to get to the main point of Limits to Mobility [see the LTM summary version]: We are in a complex ecology with no one measure of what is “Good” so no “efficiency” overall. The ecology, in the economic-market model, is a distributed, non-finite game of all participants getting what they can under formal rules and opportunities.
There has long been contention between what is loosely “the market” (but hardly free with giant, politically-active corporations and inequitable influencers) and the State (that increasingly mirrors those inequitable actors in the economy). The argument tries to pull the resources away from the State because they will be more “efficient” in distributed use. We just get questions about our complex ecology:
What is the wanted (numerator) measure?
What can be gotten by what kind of object (an individual, the State, an Amazonian tribe) for what expense?
These questions were put in perspective by that famous parable from Garrett Hardin [The Tragedy of the Commons, 1968]. The TOTC emphasizes the cases of formal failure when the set of wants gets what no one wants because the distributed getting is so efficient. The commons is “free”, just like “free” roads. We all go to infinite efficiency.
LTM takes this to imply the need to regulate and preserve an ecological form capable of persisting. This preservation has no efficiency because a form in which to interact is not what anyone wants. It just self-organizes or evolves and has all the rules and constraints we dislike. The opportunities to take are just local to us and within our grasp. There is a qualitative, scale, difference. I have been most interested in the urban access form and the fate of transit-oriented development (TOD) that is our most evident TOTC. We crave the efficiency of mobility to “get places” while disregarding the form in which places and rail transit evolved and persist, or become extinct.
Efficiency is Myopic
Efficiency is myopic. It cannot be scaled to a formal level unless formal objects with agency can have their distinct efficiency of interaction. A DOGE gang is however not the State object and the thin difference is constitutional. If the State “wants” to preserve itself, for “our way of life”, we have to be careful how we define the efficiency. You get defense and damn the cost. If the State rather wants to demolish urban development for more automobile traffic where it does not fit, that is absurd and how can it be efficient?
The Sagamore Conference (1958) on Highways and Urban Development: “This photo illustrates how modern highways can help promote good physical environment.”
Efficiency implies the separation of scale levels. That ties to the previous discussion of homeostasis, requisite variety and hierarchical regulation. The form is a different object from its contained objects. The State is not the market but the State has a formal role to the market (sanction of the rules of contract and ownership). Whether any kind of State or other social organization of ours persists is not well supported by history. But is it a matter of efficiency? No it is a matter of managing risk with equity.
The Perversion of Efficiency
It was supposed that efficiency consisted of two different measures: A “good” thing wanted and a resource regrettably expended. Mobility gets places but requires time, or generally a cost. That efficiency is quite individualized and subjective.
The formal measure of efficiency for highways—what motivates the absurdity of demolishing places for traffic—has been codified by the Level of Service (LOS) [detail of development and use in LTM Part III]. Read the previous Highway Capacity Manuals closely and you see that LOS comes down to a subjective experience of the driver. Its numerical translation to mobility for traffic volumes (not individuals) or volume/capacity ratio indicates the problem of scaling efficiency. Who is wanting the volume? Capacity either emerges with the urban access or is bought by the State, with taxes for projects.
There has been a long urge to motivate the projects by some generic measure of efficiency. And there has been much effort to prove they are efficient in the large. Highways are good case to study. LOS just belongs to the individual segments and it is hard to see a highway segment as an agent with wants, much less so than a species or urban downtown to persist.
Wait. Suppose we define efficiency with a numerator and denominator that are the same measure of what everyone wants: Money. We get Benefit-Cost (B-C) analysis. We get Gross Domestic Product (GDP) that is slightly different because it is an efficiency, a money amount per time or productivity. But money is the attractive, seemingly objective measure. We all want More just as we all want less taxes that take moneyfrom us.
The peril to the ecology of GDP has been well noted [e.g., Herman Daly, Steady-State Economics, 1977, clearly about a persistent ecological form against a money economy]. B-C is just net money although B/C is also an efficiency, equivalent to a rate of return. B-C raises many questions about how any change in the state of the ecology—with its many and incommensurate measures—can be reduced to dollars. But the more basic issue is what dollars have to do with wants or efficiency at all.
What is Economic Value?
This is a big question that has been addressed in LTM from various approaches. The most basic is economy that is literally how we manage what we live in. The market in which money evolves as a formal token of transaction has been approached with many versions of value and how it originates (labor? nature?) but none place the value in the money token.
The modern version of economic value [Gerard Debreu, Theory of Value: An axiomatic analysis of economic equilibrium, 1959] is the game-theory version: It is the state of the ecology when all transacting agents are satisfied with their state. This equilibrium is presumably a steady-state. But we know that the inputs or disturbances to this economy (for whatever ecology it apples to) change and there is no persistence except at some higher level of form. We expect laws of ownership and contract to persist even in an unstable or growing economy. Population growth implies the persistence of the genome. Money is just the ephemeral token for the focal-efficient transactions as in our budget management for all the wants we can satisfy by the money we control. More money could just be “inflation” but in the strict definition of value money loses all meaning because no further transactions follow. A pile of money—if like Scrooge McDuck that is what you want to have—becomes value-less for changing or satisfying anything.
Because the ecology is a non-equilibrium system, with only some high level of persistent form, money keeps mediating our transactions within the very specific form of the market (that is not the full definition of the economy as ecological management). But these quibbles aside how do we “inflate” money into some social measure or efficiency, as if the State is Scrooge McDuck wanting a pile of it?
How welfare economists arrived at social measures of what is wanted is a story of social theory abstracted from real ecological transactions. Welfare economics only works if there is a social measure of what is wanted and what is Good to have. I refer to Vilfredo Pareto who, early in the 20th century, established some axioms:
The individual wants or motivations for interaction (that he called ophelimite) are subjective, personal and incommensurate.
There is clearly a political concept of what is “generally good” that may motivate State action. Pareto called that utilite.
The subsequent confusion with the English usage of utility (as in utilitarianism) has only led to the chimera of trying to measure what motivates us and our “satisfaction”.. At least it led to recognizing risk in how we transact when there is a bet (dollar cost) against an uncertain dollar payoff [Von Neumann and Morgenstern, Theory of Games and Economic Behavior, 1944]. You buy insurance and your dissipated sibling invests in lotteries. The risk acceptance varies but where is the uniform, social value?
The attempt to give some economic validation to a State program then falls to pieces. But that was not accepted. In finance there is risk and varying perceptions of B/C just as in ordinary market trade there are varying perceptions of how much that ugly picture or cancer-causing tobacco product is worth. But for investment we accept money committed against future money gained.
This “investment” model is risk diverse but the key criterion is that it is accountable. The person putting money in is accountable for what will be gained. Further, as a model of risk in evolution (and there is lots of risk) the learning by the accountable agents, or species, is essential. We get species that fit the ecological form, not random “bets” on genomes.
We know where this gets to in Public Finance (see the texts, especially Musgrave). Even in Federal project management, even in DOGE if it has any logic at all, dollars are the handy measure and the efficiency is B/C, return on investment. If B/C meets some financial market threshold (e.g., the bond market interest rate for Federal debt) then the project investment is “Good”. The State has been reduced to what the “market” would do, if it had the eminent domain power to do projects that the market cannot do.
Efficiency Uber Alles
This doctrine of B/C efficiency is taken by some politicians as the epitome of rationality. It should replace political discretion. The idea has been applied to State transport project selection (e.g., Virginia). B/C floats around highways: Think of the money value of time saved! And yet there is no requirement for B/C analysis of individual highway projects. Why not? Because the highway program is to provide a joint, formal, object of connectivity whose value cannot be allocated to any part. No the formal question was always of the utilite of replacing the TOD and its rail network with freeways. But try to find who was accountable for that outcome or who learned from it. What we get are, like DOGE, unelected gangs of highway engineers looking for bottlenecks with their LOS efficiency.
Having been a practitioner, even manual writer of B-C (or B/C) analysis I observe the following: For an accountable agent (investor) putting in money to get money, and for all profit-making corporate managers, I fully endorse a careful accounting for what is spent and the predictions of what is gained, both in $$$. As a treasurer of some non-profits I never tried to equate the output with the expense except to “balance the budget” and ensure a sustainable treasury. Already those are quite different approaches but neither scales to the State. At least not our deficit-indifferent, money-printing, creditor-paying State. DOGE is a kind of proof of how that State fails either as financial accountability or preserving a form of the State. The Big Beautiful Bill for the 2025 Budget has a questionable utilite and no sustainable treasury. But it is the equity that is the most obvious defect.
Efficiency Uber Equity
The market and its value is above all a form of equity, the Pareto optimum that every participant transacts in a direction of being better (at least no worse) off. Some are just endowed with less budget than others. The value is not about equity as all outcomes the same, only the ruly opportunity to do the best with what you have, and relative to your risk taking.
It can only be supposed that the State is at the formal, value, level and just aggregates all its contents (people and the rest of the ecology) into one measure of utilite. The distribution or equity over the different ophelimite cannot be aggregated simply because it is incommensurate. Or rather the rich can donate to my campaign and the poor are just blamed for sucking up the taxes from the rich.
The role of equity has been much debated. Is is a matter of “justice”? Even Rawls’ [A Theory of Justice, 1970] model of justice had to back into why equity is a social criterion. Some take it as a matter of political persistence against revolution (probably true). Others point out that the many poor must still buy the stuff that makes the rich rich. I attribute it to the evolution of our social form. It is apparent in defense that we do not segregate who is protected in our “way of life” however unequal. There is no group with an inequity since that contradicts the identity of “group”. Like the highways, we are parts of a joint system: All are necessary and value is not partible.
I admit that equity is a contentious issue. But not as contentious as efficiency reduced to B/C. The formal function of the ecology or the State is not partible. It is E Pluribus Unum as our motto says. That motto recognizes the qualitative difference between the focal contents and the formal “whole”. It is how the State gets its eminent domain power. Whatever utilite is, it is not a homogenization of the state of the State into one measure or an efficiency on that one measure. That is not what any one of us is, and our variety cannot “add up” to such a thing.
The welfare economics that goes into a theory of public finance attempts to displace the accountability and responsibility of the State. It becomes the bureaucratic central administration that is as anathema as State Planning of the economy. There is an ecological, or market, logic against that and therefore a separate, formal, role for the State. B/C cannot cross the qualitative scale barrier. Mostly, it fails the accountability test since the future dollars are neither real nor accountable to any person. There must be budget accounting by the “bean counters” in dollars but the State functions disperse into manifold, incommensurate functions under constitutional discretion. Defense is only the most unified, it still has myriad task functions and is not measured by B/C. Nor is its application without political dispute.
DOGE and the current administration have so twisted any political or economic logic, and will walk away from the accountability, that the argument against the “objective” State hardly addresses the current threat to national integrity. However, the dismissal of equity—of who bears the B and the C in B/C—in the theory of public finance is just pernicious. It is only a deduction from the aggregation of numerical B/C that cannot break into the parts of who goes into the B and C mixer. And both the B and C are predictions, necessarily statistical and of risk. It is not possible to specify who gets what, but there is a clear distinction between a persistent policy of Robin Hood or his evil twin.
The axiom of dismissing distributional equity can be attributed to the role of constraints on any attempt to optimize some measure (a topic spread through LTM by my misspent youth learning math programming). The State is incompetent to look after “individual interests” and so we have the market and a set of individual rights protected from the State. But equity itself is an aggregate criterion and that is what the political or justice argument hinges on. We cannot have an “unfair” form.
The dismissal of equity for efficiency can be traced to the doctrine about the “compensation principle” of KHS named for Nicholas Kaldor, John Hicks, and Tibor Scitovsky. It is articulated in a 1941 paper by Scitovsky [“A Note on Welfare Propositions in Economics”] and becomes tied to Public Finance doctrine by Musgrave. But the B/C that becomes the “efficiency” is a fallacy of economists regarding the State as any one measure, let alone of dollar ratios. Or is there no separation of financial accounting and the State? And that question applies especially in the expanded sense of ecology versus the State.
How the State is Different
Neither the ecology nor evolution is an agent seeking efficiency regardless of the parts from which the form emerges. That is self-organization. The form does not act on some intentional path of “betterness” nor will it reach a “value”. But the parts fit the form and that is how the form persists to contain all its varied but efficient interactions.
The constitutional question is whether the State is an efficient actor on us or regulator of the form of our interactions. The theory of good-old liberal market democracy tends to the latter. Projects always test the boundary.
Hobbes thought that despite the absolute power of the State it was pretermitted (excluded by indifference if not ignorance) from our level of interaction. Our Constitution serves to limit top-down power, both on acts of commission (projects) and preemption of subordinate levels. As pointed out previously regarding urban regions it is a defect that State-local preemption is not also constrained. There is no question that the State sanctions rules of interaction and that is part of formal regulation (internal) with defense (external). The critical difference between levels hinges on where efficiency applies. Preservation of form is an accountable function that is existential and not efficient. Don’t like taxes? Alright, reduce them until there is no State. That is not an issue of efficiency. DOGE just arbitrarily decided what the State should be doing and the Big Beautiful Bill is just produces inequitable risk with bad budget accounting.
The State and the market economy are different forms. Both are different from the global ecological form that contains them both. But between every level the same barrier to efficiency (also final cause or teleology) applies. That is the implication of self-organized evolution, democracy or the “invisible hand”. Should our powerful State and market apply efficiency to the ecology (more consumption, more GDP, more money for political corruption) that would be the TOTC on steroids.
The problem with efficiency without equity or formal regulation is that it collapses the entire structure of ecological complexity. Even in our narrow social forms that would mean the end of democracy by the kind of State Planning we abhorred in the Soviet version. We skate on thin ice when we try to inflate our myopic efficiency to greater levels of social power. It is a Pied Piper trend of follow-the -leader who delivers the money. That is our dilemma. I just refer to the specific and historic case of how we sacrificed the TOD for a myopic, unaccountable efficiency of auto traffic. If we care that little about the urban ecology we are immediately in, then the State and the global ecology will follow. And that is no path of efficiency.