Economic Efficiency as Stability

Economic Efficiency

An allocation is Pareto efficient when no one can be made better off without making someone else worse off. Suppose you and I are the only two people sharing a hundred oranges, we both prefer more oranges, and ten remain freely available after I receive sixty and you receive thirty. Giving you the remaining ten improves your situation without reducing my share. If instead I have ninety-nine oranges and you have one, giving you more requires reducing my share. Under these assumptions, that allocation is Pareto efficient despite being highly unequal.

Thus, Pareto efficiency doesn’t necessarily mean a fair distribution. Having an efficient market might produce undesirable outcomes. So, what can we learn by using efficiency as a model?

Applying the Model in Sociopolitical Contexts

Many situations could be changed only by making some people worse off. That does not settle whether the change is desirable. It might be reasonable for me to give up ten oranges, going down to eighty-nine so you can have eleven. In political settings, the prospect of losses can also explain why groups defend a stable compromise even when it leaves important concerns unresolved.

Case Study: Mexican Comic Book Industry (1940–1970)

The comic book industry in Mexico started in the late 1930s. By the mid-1940s, comic books were immensely popular, widely consumed and shared by Mexicans from a variety of backgrounds. Mexican comic books were very different from the typical American comic book. As Anne Rubenstein describes in Bad Language, Naked Ladies, and Other Threats to the Nation, comic books in Mexico did not focus on superheroes and were not primarily consumed by young men. The stories featured regular Mexicans, often in melodramatic situations, navigating the exaggerated complexities and challenges of a Mexican culture that was quickly modernizing. Each comic book contained multiple stories, some of which would go on for years. The books contained contests, letters from readers, some reproductions of American comics, and artwork. Comics were read by Mexicans of all ages and economic backgrounds.

However, not all Mexicans were comfortable with the content of the comics. Some people felt they were indecent and immoral, a corruptive influence on readers. Rubenstein explains that the development of comic books occurred against a backdrop of large changes taking place in Mexico, including movement from rural to urban areas, expanded education and literacy, increased work opportunities for women, and a modernizing communications and transportation infrastructure. As such, comics often contained stories that were at odds with perceived traditional experiences and values.

Not surprisingly, groups of protestors organized to demand the government exert more control over the content of comic books. Some, like the Catholic church, wanted an outright ban on comic books because of their immoral subject matter, especially concerning premarital sex. But there were also groups that wanted to ban comic books because they felt the books encouraged a breakdown of family values and were thus a threat to national unity. Still others resisted comic books because the borrowed American content was seen as a form of cultural imperialism that would negatively impact the development of Mexican culture.

In response, the Mexican government created a commission charged with overseeing and approving comic book content. However, the design of the commission was not an unqualified win for those who opposed comic books. Rubenstein explains that when designing the commission, “the government acted in an attempt to satisfy both supporters and opponents of mass media…. The new Commission had no clear powers of enforcement: it could levy fines, but not require that the judiciary collect them; it could ask that publishers submit to interviews, or even be arrested, but could not compel the police to make these arrests.”

The commission functioned as a government-sanctioned mediator with those who wanted to ban comic books or at least substantially change their content. The way the government designed and supported the commission through the years ensured that the efforts of protestors “were met with just enough success to prevent them from giving up, but not nearly enough to satisfy them.”

This commission was the principal tool the government used to make sure there were no outright losers in the debate on comic books. Publishers could still publish. The Mexican public could still consume comic books. And those who heavily opposed the comics had a place where they could go to vent their frustrations and have the assurance the problem was being dealt with.

The situation was a tricky one for the government to navigate. Some of the opponents of comic books were quite powerful, such as the Catholic church. And there were enough individuals disgusted by the content of comic books that to ignore the issue completely could have been destabilizing for the government.

On the other hand, comic book publishers were powerful economic agents in Mexico. They also often owned newspapers and were thus in a position to offer direct and visible support to politicians. Comic books were an important source of revenue for thousands of vendors, since they sold by the millions. There was clearly a large audience for them.

The commission became the government’s way of maintaining a balance among all the opposing factions, ensuring that no one completely lost out. This provides an analogy to Pareto efficiency: changes that benefited one faction could impose costs on another. The account explains a political balance rather than demonstrating that no possible improvement existed. To heavily censor or ban comic books would hurt publishers and vendors and have a negative economic impact on the state. Giving publishers free and unsupervised rein would alienate opponents of the content and could erode their support for the government.

In the end, more than thirty years of protest did relatively little to change the comic book industry. The commission helped sustain a compromise: publishers continued operating, while opponents retained a forum for their complaints. Stability did not require everyone to be satisfied.