paretoalhaisuus

Paretoalhaisuus, often translated as Pareto inefficiency or Pareto suboptimality, refers to an allocation of resources or a state of affairs where it is possible to make at least one individual better off without making any other individual worse off. This means that the current situation is not Pareto efficient. In a Pareto inefficient state, there is potential for improvement that benefits someone without harming anyone else.

The concept originates from the work of Italian economist Vilfredo Pareto and is a fundamental principle in welfare economics. It is used to analyze the efficiency of economic systems, policies, and market outcomes. A situation is considered Pareto efficient if no further reallocation of resources can make any individual better off without making at least one other individual worse off. In such a state, any attempt to improve one person's well-being necessarily diminishes another's.

Pareto improvements are changes that move an economy or a system from a Pareto inefficient state towards a Pareto efficient state. While Pareto efficiency is a desirable benchmark, it does not necessarily imply fairness or equity. A situation can be Pareto efficient but highly unequal, with some individuals having a great deal while others have very little, as long as no one can be made better off without taking from someone else. Therefore, Pareto efficiency is a criterion for efficiency, not necessarily for social justice.