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Productive Efficiency in the Steam-Electric Generating Industry

Journal of Political Economy 1971 79(4), 878-886
Linear programming techniques are used to estimate an industry frontier production function. Measures of technical, price, and economic efficiency given scale are calculated. Analyses of these indexes indicate that both neutral and nonneutral economies of scale exist, nonneutral (fuel saving) technological advance has occurred, and plant efficiency is related to the production technique utilized. These results are interpreted to imply that the frontier function and the multidimensional efficiency indexes are reasonable. The possibility is raised that reliance on the fuel conversion ratio as a measure of plant efficiency has resulted in nonoptimum combinations of factors.