X-Inefficiency Xists: Reply to an Xorcist

In 1976, Stigler wrote a critique of X-efficiency theory, indicating his distaste for the concept and urging economists to abandon the idea. In the end, his plea makes nonscientific appeals. Stigler makes 2 essential points: 1. X-efficiency is an illusion; it is really a matter of ignorance and mistakes. 2. Firms minimize costs, despite the fact that they choose different production techniques under similar circumstances. It is contended that X-inefficiency exists. It results from incomplete contracts, effort discretion, and nonmaximizing behavor, rather than lack of information or errors.