Pareto criterion

Pareto criterion

Any criterion for allocating an economy’s resources at “unity”, where re-allocation of resources cannot improve conditions for one person or group, without worsening conditions for others.
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The Pareto criterion of optimality comes to mind, i.
The Pareto criterion says that a move is efficiency enhancing only if at least one person gains from the move and no one loses, and that a particular outcome is efficient if there is no move from that position which leaves each party at least as well off as they were in the original position.
Menus cannot usually be ranked by the Pareto criterion.
The Pareto criterion holds that one policy ought to be preferred over another if at least one individual's welfare is improved as long as no individual's welfare is negatively affected.
Therefore, Kaldor-Hicks efficiency criterion is more real than Pareto criterion and is more acceptable in economic analysis of law.
This is related to the Pareto Criterion that a change is desirable if it makes at least one person better off (increases their utility) without reducing the utility of another person.
The first of these studies introduces the Pareto criterion for welfare enhancement (at least someone must gain with no one being harmed) when presenting the first law of warfare economics, though the exposition is partial in that it was developed in the context of productive efficiency alone.
In other words, the Pareto criterion with actual compensation embodies a value judgment in favor of the status quo, just as the potential-compensation criterion embodies one against it.
It is in this sense that "the Pareto criterion has been thought to be an expression of individual liberty.
The Pareto criterion would not be widely accepted unless it takes account of moral harms; but: if it does take account of moral harms then there is no reason to doubt that egalitarian concerns can be incorporated into the Pareto argument.
If, however, current actions would impose costs on future generations that were poorly defined or unmeasurable, there would be no operational basis for applying the Pareto criterion.
8) Calabresi accordingly concluded "that the Pareto criterion is of no general use as a normative guide," (9) a limitation that makes it necessary for economists to account for distributive concerns: