How do you balance efficiency and equity in decision making?

1 What is efficiency?

Efficiency is the ability to achieve the best possible outcomes with the least possible resources, time, or effort. In decision making, efficiency often means finding the optimal solution that maximizes or minimizes a single objective function, such as profit, cost, quality, or satisfaction. However, in many real-world problems, there are multiple objectives that may conflict with each other, such as environmental impact, social welfare, customer loyalty, or employee morale. In these cases, efficiency requires finding a set of solutions that are Pareto optimal, meaning that no other solution can improve one objective without worsening another.

2 What is equity?

Equity is the fairness or justice of the distribution of benefits and burdens among the different groups or individuals involved in or affected by a decision. Equity often means ensuring that everyone has equal access, opportunity, or treatment, regardless of their characteristics, preferences, or needs. However, in many real-world problems, there are different types of equity that may conflict with each other, such as horizontal equity (treating equals equally), vertical equity (treating unequals differently according to their needs), procedural equity (following fair and transparent rules and processes), or outcome equity (achieving fair and balanced results).

3 Why are efficiency and equity important?

Efficiency and equity are important because they reflect the values and goals of the decision makers and the stakeholders. They also have implications for the performance and sustainability of the decision outcomes. For example, an efficient decision may increase the productivity and profitability of an organization, but if it is perceived as unfair or discriminatory by some employees or customers, it may lead to dissatisfaction, resentment, or resistance. On the other hand, an equitable decision may enhance the trust and loyalty of the stakeholders, but if it is too costly or impractical to implement, it may compromise the quality or viability of the solution.

4 How can you measure efficiency and equity?

Measuring efficiency and equity can be challenging, as they depend on the definition and quantification of the objectives and the criteria. One way to measure efficiency is to use a multi-criteria decision making (MCDM) method, such as the weighted sum method, the analytic hierarchy process, or the goal programming method, to aggregate the multiple objectives into a single score or ranking for each alternative. Another way to measure efficiency is to use a data envelopment analysis (DEA) method, which compares the relative efficiency of each alternative based on the ratio of outputs to inputs. One way to measure equity is to use a social welfare function, such as the utilitarian function, the egalitarian function, or the Rawlsian function, to aggregate the individual utilities or preferences of the stakeholders into a collective utility or preference for each alternative. Another way to measure equity is to use a fairness measure, such as the Gini coefficient, the Lorenz curve, or the Atkinson index, to assess the inequality or disparity of the distribution of benefits and burdens among the stakeholders.

5 How can you balance efficiency and equity?

Balancing efficiency and equity can be difficult, as there may not be a single solution that satisfies both goals. One approach is to use a multi-objective optimization (MOO) method, such as the weighted sum method, the epsilon-constraint method, or the evolutionary algorithm method, to generate a set of Pareto optimal solutions that represent the trade-offs between efficiency and equity. Another approach is to use a multi-attribute decision making (MADM) method, such as the simple additive weighting method, the TOPSIS method, or the ELECTRE method, to evaluate and select the best alternative based on the weights and thresholds of the criteria. A third approach is to use a participatory or collaborative decision making (PDM or CDM) method, such as the Delphi method, the nominal group technique, or the analytic network process, to involve the stakeholders in the definition, measurement, and evaluation of the objectives and the criteria, and to reach a consensus or a compromise on the final decision.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?