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Do you think Pareto efficient allocation is fair? Justify your answer.

Do you think Pareto efficient allocation is fair? Justify your answer.

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Answer #1

An allocation is Pareto efficient if there is no other allocation in which some other individual is better off and no individual is worse off.

Optimality and equity are different attributes. Optimality is, in fact, a criterion of efficiency in resource allocation and it not refers to the equity. There are so many optimal allocations as there are initial distributions of factors among individuals.

There is no connection between Pareto efficiency and equity! In particular, a Pareto efficient outcome may be very inequitable. For example, the outcome in which I have all the goods in the world is Pareto efficient (since there is no way to make someone better off without making me worse off).

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