As with any tool, its all about how you use it.
The common misconception is that recursion is inefficient because each iteration entails calling a subroutine. In a lot of langauges, this means allocating a stack frame and freezing the previous stack frame until the next one exits. This can quickly eat up recourses, and depending upon the complexity of the recursion, leave a number of half finished computations. The result is that your function takes up exponetntial memory/stack/resource space. A common technique to avoid this in Scheme and other languages (even including C with the right compiler) is called Tail Call Optimization.
Standard ML is a functional language, which means that calling functions is important, so therefore, the Standard ML compiler is built to optimize function calls. As for recursion, it uses a heap based allocation rather than stack based, which allows for a number of optimizations to take place. I would provide a link on this, but to be honest, I read it while waist deep in the Standard ML site and I have never been able to dig it out again.
Scheme too makes many optimizations which allow it to be very efficient, even in the face of recusion which would bring most other languages to a halt (since they would have consumed all available resources). Googling "Scheme", "Optimized", etc will get you a number of links to lots of good info.
But my point is that it is unwise, as compiler technology improves, to rule out a recursive solution which is more understandable and maintainable because 5-10 years ago compiler technology couldn't handle it.
There is always a trade off between programmer time (writing, documenting and maintaining) and computer time (execution). Back in the days of yore, computer time was more expensive than programmer time. The inverse is true now.
Once again, it is all in how you use it. Bad recursion is not worse than bad iteration, its all bad programming in the end. If the problem/algorithm itself is recursive then the most understandable and maintainable version of it will be the recursive one.
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