I was saddened to see a really confused column by Barry Schwartz today in the New York Times about efficiency in American society.
Schwartz, a psychology professor at Swarthmore, wrote The Paradox of Choice. The book argued that more choice isn’t always better and, even worse, often leads to worse outcomes. It was one of my favorite “popular science books.” Sure, there were some questionable conclusions in that book (e.g., the jam experiment might not actually have showed the problem with too much choice as clearly as Schwartz claims), but his main insight about quantity of choices vs good decision making struck a deep chord with me.
So I was excited to see Mr. Schwartz’s column in today’s New York Times about the dangers of too much efficiency. Unfortunately, Schwartz confuses the concepts of efficiency and quality so thoroughly that I came away from the article perplexed.
Schwartz’s main argument is the while efficiency is good, more efficiency is not always better. This makes sense to me, but the way he goes about making this argument doesn’t.
Mitt Romney, American Society, and Efficiency
Schwartz focuses on efficiency in American society, epitomized in recent society by Mitt Romney’s tenure at Bain Capital. He says that “increased efficiency is the only way a society’s standard of living will improve” and that Bain Capital and similar firms try to “increase the efficiency of the companies they buy” by eliminating waste. This may or may not involve eliminating jobs–whether jobs are created or destroyed is irrelevant to them as long as it improves efficiency.
The opposite of efficiency is friction. Schwartz says you can decrease friction by doing such things as making cars more fuel-efficient, using money rather than bartering, and speeding up financial transactions. This leads to higher-level abstractions, such as financial traders dealing with mortgage securities associated with ratings as a bundle rather than checking the situations of individual mortgage applicants. The good mortgages will balance out the bad mortgages, the thinking behind bundling goes. Of course, this helped lead to today’s mortgage crisis.
So this leads Schwartz to make the point that in some cases more friction is better because it forces us to slow down and make better decisions. Basically, he’s saying our brains (there’s that psychology professor again) aren’t designed to make decisions super fast like computers do. He says that “whereas some efficiency is good, more efficiency may not be better.”
So what is my problem with this op-ed? It’s that Schwartz basically plays semantics with the word efficiency. In Schwartz’s op-ed, efficiency is nothing buy speed. But I would argue that the concept of quality is intertwined with the concept of efficiency. Would you call someone efficient on a manufacturing line if he screws on widget A 10 times faster than another guy but all these widgets are done wrong? Of course not.
Here are some dictionary definitions of efficiency from Merriam Webster, one more science related and one about it as a concept in general:
- Efficiency: the ratio of the useful energy delivered by a dynamic system to the energy supplied to it
- Efficient: productive of desired effects
The key words here are “useful energy” and “desired effects.”
So what Schwartz should really be arguing is that Bain Capital and mortgage security firms aren’t actually efficient if they’re doing things with little effort but not getting good results.
What do you think? Is this merely a semantic argument, or am I on to something here?