In the fourth lecture in the series, ‘Inequality Conversations’, hosted by the Centre for Public Policy at IIM Bangalore, Prof. Deepak Malghan, from the Public Policy area, traces the historical relationship between Inequality and Efficiency and says algorithm has replaced engine as the metaphor for efficiency
14 MARCH, 2022: In his lecture this evening, on ‘Inequality and Efficiency: A Three-Hundred Year Potted History’, delivered as part of the Centre for Public Policy’s ‘Inequality Conversations’, Professor Deepak Malghan, from the Public Policy area, pointed out that there is no idea in all economic theory and praxis that is more important than efficiency. “Despite, or perhaps because of its centrality and ubiquity, efficiency’s intellectual provenance has largely escaped scholarly attention,” he observed, providing a historical framing of inequality.
“While there are fine histories of the science of thermodynamics and how it evolved jointly with economic thought, the intellectual trajectory of efficiency from steam engines to economics and beyond is not well charted. My talk will show how these connected histories are central to understanding modern economic inequality. These histories also shed new light on quintessential policy conundrums such as Arthur M Okun’s ‘big tradeoff’ between equality and efficiency. The time is quite right to revisit Okun,” he said.
Prof. Malghan explained that the idea of efficiency has undergone several mutations from the time it was first used to measure the performance of waterwheels and steam engines. “Efficiency is now a personal, economic, social, and national virtue in its various forms. The intellectual history of economic efficiency is intimately linked to this larger social history of efficiency spanning disciplines, continents, and centuries.”
Historians of technology, he said, have largely focused on innovation and efficiency. “This splits society into two – elites and maintainers. History is littered with examples of tech innovations built on earlier work of maintainers. Efficiency provides the anchor that enables historians of technology to write from a subaltern perspective.”
Citing from the work of the 18th century French engineer Nicolas Léonard Sadi Carnot, Prof. Malghan said with the advent of fossil fuels, the world redefined the notion of the word ‘efficiency’ and brought with it a dimension of political economy. Carnot published his book in the heyday of steam engines. His theory explained why steam engines using superheated steam were better because of the higher temperature of the consequent hot reservoir. “This means that any activity that does not use higher temperature gradients is deemed inefficient. Handlooms and hand-weaving enterprises fall by the wayside, then. We have retooled modern society – mass production, mass consumption – everything we do is on a mass scale. There is no way to be Carnot-efficient and decentralize! We even fight wars on a mass scale!
It is important to understand that power is tied to our notion of efficiency,” he explained.
Economic efficiency, he said, is related to the “norm-deviation framework”, an 18th-century political theory innovation pioneered by Hume and, especially, Jeremy Bentham. The norm-deviation framework was well embedded within the larger public culture by the Victorian age. For example, efficiency as a norm-deviation device was central to the relationship between “quantification and public reason”.
“There are three parts to any efficiency metric – definition of a normative benchmark, measurement of the real state of the world, and comparison of the actual/ observed state of the world and the ideal state/ normative benchmark. Efficiency’s pivotal role in the history of 19th-century quantification also helps explain how the norm deviation framework evolved into an ethical principle adopted by disparate disciplines, including economics,” he argued, remarking that norm deviation is “a very racialized device”.
Stating that until the norm-deviation structure came into existence, the world was in balance, Prof. Malghan explained how after efficiency thinking arose, the world was seen as a dynamic, shifting arena. “Efficiency was central to the industrial revolution and to the history of Manchester,” he said, quoting from Charles Dickens and Friedrich Engels, on the emerging capitalist economy and on Angel Meadow, the historical cemetery in Manchester. “Efficiency demanded that in death and is in life, workers’ life be governed by one central principle – efficiency. So, they were buried one on top of the other. This is what happened at Angel Meadow. Efficiency is joined at the hip with different kinds of inequalities,” he added, explaining how ‘efficiency’ travelled to India in the 1930s. Terming them the Crucible Years, he said in the period between 1930 and 1950 Indians paid a lot of attention to the Bolsheviks and the Soviet system to understand efficiency and scientific management.
In his introduction to the lecture, Professor Arpit Shah, from the Centre for Public Policy at IIM Bangalore, set the context for the series in the backdrop of the World Inequality Report 2022. “The Centre for Public Policy has lined up several more conversations in this series where we will address different kinds of inequality. So stay tuned,” he added.
Watch here: https://youtu.be/yiFFQVus5_4