Short academic piece freely available by Peter Leeson. Abstract:
Every economic explanation assumes maximization. How strange, then, that few economists accept one of maximization’s most straightforward implications: every observed institution is efficient. My aim is to persuade economists of this fact and thus to dissuade them from making illogical claims about social welfare. To frame my argument, I consider the “property rights approach” to institutions developed by Yoram Barzel. I speculate that economists resist what maximization implies about institutional efficiency the world because they think that efficiency-always precludes them from improving the world, and hope of improving the world is what attracted them to economics in the first place. But, besides being inconsistent, resistance is unnecessary: efficiency-always does not preclude economists, or anyone else, from improving the world.
Reminds me of the day during the first quarter of my graduate study at UCLA when Armen Alchian, in about 15 seconds, utterly destroyed, to the astonishment of the assembled students, the concept of Pareto optimality. "Meaningless."