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Concept of Pareto optimum

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  1. Introduction
  2. Definition
  3. Pareto optimal and desirable state
  4. Pareto optimum and neoclassical economics
  5. Conclusion

Many possible states of society are also Pareto optima. The concept of Pareto optimum does not allow to compare : to see which are the most accurate or desirable, it is necessary to use other evaluation criteria, qualitative or quantitative terms.
For this reason, a situation optimality " Pareto " is not necessarily a situation socially " right." To take an extreme example, a society where all the wealth belongs to one man is a Pareto optimum, because transfer some of its wealth to others reduce the welfare of at least one individual.

Moreover, in this situation, it becomes possible to make changes that would increase the total stock of wealth of society without removing capital to this man, then the situation is not Pareto -optimal. Also in this same situation, assign a capital increase in the company to this man only ( instead of attributing it to those who have nothing ) recreates a Pareto optimum.

It is therefore necessary to employ a strict terminology and talk about effective state " Pareto ". A Pareto optimum is a minimal notion of efficiency measurement ; it can in some cases give an indication of the general direction of action, or to avoid making serious mistakes.

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