Paretoparannuksen

Paretoparannus, often translated as Pareto improvement or Pareto optimality, is a concept in economics and decision theory. It describes a situation where a change benefits at least one person without making anyone else worse off. This implies that a Pareto improvement leads to a more efficient allocation of resources or a better societal outcome.

A state is considered Pareto optimal when no further Pareto improvements are possible. This means that to make one person better off, at least one other person must necessarily be made worse off. It's important to note that Pareto optimality does not necessarily imply fairness or equity. A situation can be Pareto optimal even if there are significant disparities in wealth or well-being among individuals.

The concept is often used to evaluate economic policies and market outcomes. For example, a voluntary trade between two individuals is generally considered a Pareto improvement because both parties willingly engage in the transaction, expecting to be better off. However, identifying and implementing true Pareto improvements can be challenging in practice due to the difficulty of measuring and comparing welfare across different individuals and the potential for unintended consequences. The concept provides a benchmark for efficiency, but other criteria, such as equity or social welfare, are often considered alongside it when making policy decisions.