BOX 8.7 THE 3 ‘E’S: EFFICIENCY; ECONOMY;
EFFECTIVENESS
The three concepts can thus be seen as occupying a hierarchical
relationship with efficiency the most limited concept, economy a
somewhat broader one and effectiveness the most comprehensive.
Economy in public administration (and more generally) may be
interpreted irrationally merely as minimising financial expenditure
on a particular budget. If, however, a reduction in expenditure means
that the department or organisation fails to achieve its objective, or if,
for instance, refusal to buy capital equipment means that expensive
staff time is not made good use of, then such behaviour is far from
economical in the true sense.Monitoring performance in public policy
Any rational monitoring and evaluation of public policy needs to
measure as precisely as possible how far objectives are being achieved.
In the absence of a general-purpose measure of efficiency, such as
profitability in the private sector, then the output of public sector
organisations can only be measured in more specific terms related
to their objectives. In principle the establishment of performance232 POLICIES
Efficiencycan be seen as something like the physicists’ definition of
‘the ratio of useful work to energy expended’ (Shorter Oxford English
Dictionary: Addenda). Thus given fixed resources and a fixed objective,
efficiency can be seen as achieving the maximum effect in the desired
direction. The emphasis is often on implementing planned actions to
specification.
Economyis clearly closely related to efficiency, but is more likely to be
expressed in financial terms. It can be seen as employing minimum
resources to achieve a fixed objective. It is more likely to encompass
costing of alternative ways to achieve an objective.
Effectivenesscan then be seen as including the choice of objectives in
order to realise the values desired. The emphasis here is not on the
volume of work done, but the overall impact of the work done. In
economists’ terms has utility been maximised?