'A society that cares about efficiency needs to provide government funds for social sciences that work on the assumption that efficiency matters'. (Royal Society of Arts Journal, Issue 4, 2013) Explain what is meant by economic efficiency. Consider whether you agree that the only way to achieve economic efficiency is through public sector intervention in the economy.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

1. [25] Explanation of meaning of efficiency and explanation of the analysis which ensures an efficient optimum may be reached. Productive efficiency makes the best use of resources, and allocative efficiency ensures that no one can be made better off without someone being worse off. Individual actions are not always best for society as a whole. Discussion of reasons for market failure and necessity/desirability of government intervention to achieve efficiency. This could be by persuasion (nudge theory) rather than by enforcement. Nudge theory, originally an ethical idea not a government manipulative tool, involves designing choices to encourage decision making in wider positive interests of society. But it can be used in government context. Government intervention may thus be necessary, but it need not overcome inefficiency as there may be inefficiency in government through lack of information.
2. [18-25] L4: for a thorough explanation dealing with productive and allocative efficiency and a comment on the importance of both concepts; and an accurate discussion of market failure, with examples and a conclusion about the need for government intervention and whether such intervention is a sufficient solution.
3. [14-17] L3: for a competent but less developed explanation of the terms with accurate but limited comment on the importance. Also for a more limited discussion of the reasons for market failure and the need for government but without a comment on whether such intervention is sufficient to overcome market failure.
4. [10-13] L2: for a correct but brief explanation with some attempt at analysis possibly with only one type of efficiency correctly elaborated, no comment on importance; and for a brief analysis of market failure with few examples and no conclusion about necessity of government intervention.
5. [1-9] L1: for an answer that has some basic correct facts but includes irrelevancies and errors of theory.