Sunday, April 17, 2005
Pareto efficienty
Pareto efficiency, or Pareto optimality, is a central concept in economics with broad applications in game theory, engineering and the social sciences. A change that can make at least one individual better off, without making any other individual worse off is called a Pareto improvement: an allocation of resources is Pareto efficient when no further Pareto improvements can be made.
The term is named after Vilfredo Pareto, an Italian economist who used the concept in his studies of economic efficiency and income distribution.
If an economic system is not Pareto efficient, then it is the case that some individual can be made better off without anyone being made worse off. It is commonly accepted that such inefficient outcomes are to be avoided, and therefore Pareto efficiency is an important criterion for evaluating economic systems and political policies.
Which is why Canada's health care system, which makes it illegal for one person to pay another for medical care, is a bad idea. If both are willing to do it, it's clearly in each of their best interests'. So why prohibit them?
So the government system looks good.
The term is named after Vilfredo Pareto, an Italian economist who used the concept in his studies of economic efficiency and income distribution.
If an economic system is not Pareto efficient, then it is the case that some individual can be made better off without anyone being made worse off. It is commonly accepted that such inefficient outcomes are to be avoided, and therefore Pareto efficiency is an important criterion for evaluating economic systems and political policies.
Which is why Canada's health care system, which makes it illegal for one person to pay another for medical care, is a bad idea. If both are willing to do it, it's clearly in each of their best interests'. So why prohibit them?
So the government system looks good.
