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Pareto Efficiency
ptimality is a situation where no action or allocation is available that makes one individual better off without making another worse off.[1] The concept is named after Vilfredo Pareto (1848–1923), Italian civil engineer and economist, who used the concept in his studies of economic efficiency and income distribution. The following three concepts are closely related: - Given an initial situation, a Pareto improvement is a new situation where some agents will gain, and no agents will lose.
Pareto originally used the word "optimal" for the concept, but as it describes a situation where a limited number of people will be made better off under finite resources, and it does not take equality or social well-being into account, it is in effect a definition of and better captured by "efficiency". It would be incorrect to treat Pareto efficiency as equivalent to societal optimization,[28] as the latter is a normative concept, which is a matter of interpretation that typically would account for the consequence of degrees of inequality of distribution. W. W. Norton and Company.^ a b Mas-Colell, A.; Whinston, Michael D.; Green, Jerry R. (1995), "Chapter 16: Equilibrium and its Basic Welfare Properties", Microeconomic Theory, Oxford University Press, ISBN 978-0-19-510268-0.^ Gerard, Debreu (1959).
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