I hope it’s ok if i quote from one of your comments over there a couple paragraphs that make that point even clearer to me:

I do think, though, that the basic logic of the critique of efficiency analysis stands no matter how fancy you make the utility-maximizing models (e.g. adding uncertainty, time). I still think it’s a non sequitur to argue that:

According to my economic model, which assumes rational utility-maximizing agents, people will choose policy Y, which is different from the observed status-quo policy X. Therefore, we should change to policy Y.

The problem is that the fact that people are currently NOT choosing policy Y MUST mean that either:

1) People are not rational utility-maximizers.
2) The ancillary premises relating to the nature of the decision problems they face in your model are incorrect.

If 1 is the case, then efficiency has no substantive application in the real world. If 2 is the case, you have to go back to the drawing board and get a different model. It doesn’t matter if the policy incorporates time and uncertainty, so that you are just recommending a different policy function based on ex-ante expectations: if people are doing the best they can, then they are doing the best they can, and hence their decisions can’t be improved.

Ultimately, I think efficiency analysis is an attempt to derive “ought”’s from “is”’s. If economics is a science, then the purpose of utility functions is to predict and describe how people behave. The best utility functions are those which come closest to predicting observed behavior. When people behave differently from what’s predicted, the model is wrong, not the people.

And I’d like to add a quote coming from a comment by Uwe Reinhardt, the original NYTimes author, adding a perspective my own constructivist take on the matter:

As Ken Arrow warns us in his 1963 essay on health care, “A definition is just a definition, but when the definiendum is a word already in common use with favorable connotations, it is clear that we are really trying to be persuasive; we are implicitly recommending the achievement of optimal states.”

„In fact, whenever a policy is inefficient, there’s always an alternative policy that, in principle, is better for everyone. That’s what inefficiency means.“

The implied logical contradiction is that agents are rational, utility maximizing agents but are NOT taking advantage of mutually advantageous trades. The economist’s are trying to attach normative significance to what are really positive predictions about what agents WILL (not SHOULD) do, and not noticing that they contradict themselves.
If the trades are not being made, then by definition the agents are not maximizing utility, and hence efficiency analysis has no basis.

Economists ought to understand that inefficiency can never be observed. If you think you’ve found an inefficiency, you must be wrong because the mutually advantageous trade is not being made.

Please see the paper I cite in my posts on that cite for the full argument.