The Measurement of Technical and Economic Efficiency

Abstract

The problem of deciding the ranking of technical and economic abilities among a group of entrepreneurs is an old one and has received considerable attention from economists at different levels of sophistication. But why is it important to determine who is the best entrepreneur, who is the second best, and who is the worst? For a long time economists have assumed that the principal goal of rational entrepreneurs is maximizing profit subject to constraints imposed by the local environment. Studying the performance of various entrepreneurs, therefore, is a step toward understanding the process of making technical and economic decisions. When the best decision makers have been identified, a further presumption exists that their strategies can be used to advise those entrepreneurs who are lagging behind in the quest for maximum profit.