Chapter 5: The Concept of Optimal Transport Systems

Optimality in any system implies the most efficient use of resources in that system. Efficiency refers to a relationship between inputs and outputs, such that either a given set of inputs is being used to create the maximum possible output or a given output is being produced with the minimum set of inputs. Technical efficiency usually refers to the physical relationship between inputs and outputs. Economic efficiency introduces the prices of both inputs and outputs so that we can obtain some idea of value. Efficiency thus carries with it a notion of welfare: in an economically efficient situation we cannot make someone better off without simultaneously making someone else worse off (see Chapter 4).