Academic journal article Journal of Economic Issues

Veblen and Technical Efficiency

Academic journal article Journal of Economic Issues

Veblen and Technical Efficiency

Article excerpt

It is well known that Thorstein Veblen accused the turn-of-the-century captains of industry of sabotage. What is not so well known is that, for Veblen, sabotage was not simply a pejorative term. By sabotage, he meant a "conscientious withdrawal of efficiency" [Veblen 1990a, 38]. But efficiency, as both Veblen and a number of the engineers of his time used the term, was not the now-standard microeconomic efficiency represented by the minimum point on a U-shaped long-run average total cost curve. Veblen espoused a "technical," rather than a cost-based, definition of efficiency. The difference between these two views of efficiency can best be understood by focusing on some of the early engineers - in particular the early Taylorites - from whom Veblen borrowed heavily and who were in turn influenced greatly by Veblen in their own thinking about efficiency.

Engineering Efforts to Understand and Measure Technical Efficiency

Veblen's definition of technical efficiency was itself an engineering definition. It derived from his view of modern industry as a "[comprehensive] machine process" [Veblen 1988, 5] that was organized by means of pecuniary transactions to allow for careful management of the many interstitial adjustments that coordinated the various related branches of industry. For Veblen, technical efficiency existed when interdependent mechanized production processes throughout the economy worked together "in an efficient manner, without idleness, waste, and hardship" [Veblen 1988, 18] to produce the maximum possible amount of output, using the most technologically sophisticated industrial techniques available.(1)

Even more important, perhaps, is that a similar notion of technical efficiency was devised by engineers at around this same time - some progressive, some merely inclined by their training to study the industries in which they were employed from an engineering point of view.(2) As engineers gained employment in American firms in greater numbers around the turn of the century [e.g., Gross 1969, 18; Rae 1979, 253; Noble 1979, 39], they had new opportunities to apply their scientific training to microeconomic problems of mechanical production and plant efficiency. As well, the new requirements to coordinate the flow of goods from raw materials suppliers to the ultimate consumer in a precise and expeditious manner in modern mass production firms led engineers to pay greater attention to the organization of human effort within the firm [e.g., Chandler 1977; Nelson 1980]. Some engineers even undertook to apply their scientific methods to what were seen to be the broader economic problems of the day - employment, overproduction, low wages, and industrial waste. These early industrial engineers organized their own professional organizations and used them to share their ideas about everything from the intricate details of mechanical procedures to reorganizing the entire economy.(3) Especially prominent in the discussions of these "technicians," to use Veblen's phrase, was a group of mechanical engineers who, following Frederick Taylor, himself a mechanical engineer, sought to devise a "systematic," or "scientific," management [Layton 1971, 117 ff., 146 ff.].(4)

For many engineers, estimates of efficiency based only on costs were suspect. As William Trowbridge presented his case to the American Society of Mechanical Engineers in 1882, "there cannot be, from the nature of finance and pure mechanics, any exact mechanical relation between abstract mechanical laws and financial operations. The former are invariable and immutable, the latter dependent upon bargain and sale" [Trowbridge 1882, 258]. Others were critical of trying to measure human labor in dollars. One such engineer was Henry Gantt, a prominent disciple of Frederic Taylor and an engineer who began to read some of Veblen's work late in his career. He argued that traditional measures of efficiency measured dollars, not productive work, and that, when using such a measure, the "production of goods was always secondary to the harvesting of dollars" [quoted in Polakov 1922, 152]. …

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