# Economic principle

The economic principle (also economic efficiency principle or input-output relation ) describes the assumption that economic subjects, due to the scarcity of goods, relate the funds used to the result in their economic activity and, according to their personal preferences, an expedient maximization of benefits (e.g. private households) or aim to maximize profits (see companies). The economic principle is one of the assumptions on which the Homo oeconomicus model is based.

## Expressions

In economics, efficiency is defined as the quotient between result and effort.

${\ displaystyle {\ text {efficiency}} = {\ frac {\ text {result}} {\ text {effort}}}}$

The demand of the economic principle for the highest possible efficiency can therefore take several forms:

### Minimum principle

The minimum principle is the act of minimizing the effort with a given result.

Example:

• Goal: Drive to Berlin with as little gasoline (effort) as possible (result)
• Alternative A: 50 liters of gasoline consumption
• Alternative B: 55 liters of gasoline consumption
• Result: Alternative A is preferable to alternative B.

This expression is also called the thrift principle or (in public administration) the budget principle.

### Maximum principle

The maximum principle is the act of maximizing the result with a given effort.

Example:

• Objective: To cover the longest possible distance (result) with 50 liters of petrol (effort)
• Alternative A: 500 km driving distance
• Alternative B: 550 km driving distance
• Result: Alternative B is preferable to alternative A.

This characteristic is also called the fertility principle.

### Extremum principle

The extremum principle is the act of optimizing the relationship between effort and result with a variable effort and result.

Example:

• Goal: To achieve an optimal ratio between the distance covered and the petrol used.
• Alternative A: cover a distance of 500 km with 50 liters of gasoline consumption
• Alternative B: cover a distance of 600 km with 55 liters of gasoline consumption
• Result: At B, the distance traveled (result) is higher in relation to the fuel consumption (effort).

The extremum principle is the general form of the economic principle, because the ratio of input and output should also be optimized with the minimum and maximum principle. The minimum and maximum principles are only the extreme values. The extremum principle takes into account the usually complex optimization problems in business practice today than the minimum and maximum principle. Since the variability of both input and output is given in reality at least within certain limits, according to Heiner Müller-Merbach, the extremum principle should be in the foreground when assessing profitability.

This characteristic is also called the optimum principle.

## criticism

With the term model platonism, the philosopher Hans Albert criticized the way in which the so-called “economic principle” is usually used in economics. In the term “rationality”, for example, empirical assertions are often thrown together with value judgments , which not only leads to logical inconsistencies, but also to fraudulent justifications.

Furthermore, it is not possible to see the necessity of value judgments restricted to the presupposed purposes only; If only because the means used always produce negative as well as positive side effects on the disregarded competing purposes. The ends do not justify the means.