My interest in X-Efficiency (XE) dates back to 1978. At the time, I was writing the dissertation for my Ph. D. at Washington State University. My dissertation was concerned with the role of attitudes in the school-to-work transition among young men. I was advised by Professor Millard Hastay (a member of my committee) to look at Leibenstein's "new" book, Beyond Economic Man. One of the things that caught my attention was his be­ havioral description of (selective) rationality. It seemed that Leibenstein's behavioral description of a (selectively) rational individual was very similar to what psychologists such as Abraham Maslow were reporting as being the product of a particular motivational system. In other words, I was im­ pressed with the idea that what Leibenstein was referring to as X-ineffi­ ciency was being discussed by psychologists as "the way it (often) is. " So from the beginning I always considered the concept of X-(in)efficiency to be a valuable one for understanding human behavior. I have since come to believe that this is particularly true when considering behavior in non­ market environments, i. e. , within the firm. Work on this book, however, can most realistically said to have started with work which I began in 1982 while I was a Visiting Scholar at Harvard University. Professor Leibenstein suggested that I consider how some em­ pirical evidence which was being cited as evidence for the role of property rights might also be consistent with XE theory.

1. Introduction.- 1.1. Introduction.- 1.2. X- and allocative efficiency, and the welfare losses from monopoly power.- 1.3. X-efficiency, and the neoclassical production and cost functions.- 1.4. The development of XE theory.- 1.5. XE theory and generalized neoclassical theory..- 1.6. XE theory as a research design.- 1.7. Empirical research on XE theory.- 1.8. Critics of XE theory.- 2. Production, cost, and welfare: A review.- 2.1. Introduction.- 2.2. The firm in the short run.- 2.3. The firm in the long run.- 2.4. Firms, markets, and efficiency.- 2.5. Implications.- Appendix: Regulation theory and X-efficiency.- 3. X-efficiency: The intellectual setting and an introduction to the theory.- 3.1. Introduction.- 3.2. Complex objective functions.- 3.3. XE theory: An introduction.- 3.4. Conclusions.- 4. X-efficiency theory: 1.- 4.1. Introduction.- 4.2. The individual in XE theory.- 4.3. Individual effort and the inert area.- 4.4. Conclusions.- 5. X-efficiency theory: 2.- 5.1. Introduction.- 5.2. Intrafirm determinants of individual and group effort.- 5.3. Productivity, effort conventions, and the prisoner's dilemma.- 5.4. Market structure, pressure, and effort.- 5.5. A synthesis and an illustration.- 5.6. Implications and conclusions.- Appendix: Regulation and X-efficiency.- 6. Empirical evidence: Regulated industries.- 6.1. Introduction.- 6.2. Electric Utilities.- 6.3. Local government services.- 6.4. Symphony orchestras.- 6.5. Airlines.- 6.6. Conclusions.- 7. Empirical evidence: Ownership form.- 7.1. Introduction.- 7.2. Owner- versus manager-controlled firms.- 7.3. Public versus private ownership.- 7.4. Conclusions.- 8. Empirical evidence: Market structure.- 8.1. Introduction.- 8.2. Output and input ratios.- 8.3. Profits and X-efficiency.- 8.4. Price-fixing behavior.-8.5. Conclusions.- 9. X-efficiency, its critics, and a reply.- 9.1. Introduction.- 9.2. Rent-seeking.- 9.3. Leisure as output.- 9.4. Management utility under competition.- 9.5. Property rights.- 9.6. Some general comments.- 10. Implications and conclusions.- 10.1. X- and Allocative Efficiency.- 10.2. X-efficiency theory as a research design.- 10.3. X-efficiency and its critics.- 10.4. X-efficiency theory and neoclassical theory: Some final thoughts.- References.