ABSTRACT
Italian economist Vilfred Pareto provided a well-accepted criterion for efficiency: Pareto efficiency is achieved if no one can be made better off without making at least one person worse off. Efficiency alone does not ensure any such outcome. This chapter discusses some of the types of efficiency that maximize the net gain from an activity, and in theory, that gain can be divided to satisfy any of the objectives. What happens in practice is another matter. Efficiency is achieved if whales are harvested until the marginal benefit equals the marginal cost. An efficient whale harvest maximizes the net benefit, which is the difference between the total benefit and the total cost. The equation of marginal cost and marginal benefit forms the basis for several specific types of efficiency. What constitutes a cost and a benefit differs depending on who is making a decision. Efficiency for firms typically corresponds with maximizing profit.
