X-efficiency: economists and managers view it differently

Abstract

Leibenstein’s X-efficiency theory offers a view of productivity that differs from traditional neoclassical economics in terms of whether inefficiency exists, what causes it, and how to eliminate it. Extensive discussion of X-efficiency has occurred among economists but little has been said by the group that in the theory is primarily responsible for reducing inefficiency —managers of firms—. This article examines the viewpoints of economists and managers on the basic tenets of X-efficiency theory and what the policy implications for firms and society are of these differing views.