PARETO PRINCIPLE Welfare economics and normative questions

-Are pareto principle and cost-benefit analysis - e-g. health care or cash purchase health care:
an indicator of efficiency in welfare economics?:
Paternalism argument: sometimes it is right to
some says that pareto improvements is a moral
coerce individuals for their own good.
argument.
Critic: paternalism interferes with freedom
- Definition: given a state of affairs X is a Pareto
Improvement over Y if and only if 1) nobody Cost-benefit analysis
prefers Y to X 2) at least one person prefers X to
Y. -The scope of Pareto is so limited

-Definition: if no Pareto improvement is - winners willing to pay > looser compensations

possible then there is a pareto efficiency then a potential pareto improvement

- Principle of personal good implies the principle -Efficiency and distribution are different,
of minimal benevolence (ceteris paribus it’s a independent
moral good thing if people are better off) -Objections: efficiency and distribution should
Problems regarding Pareto be thought together

- Hicks and Kaldor suggest enlarging the pie; Conclusions

distribution is a topic for moralists and
politicians
- unappealing when it involves “nosy”
preferences
- in circumstances of uncertainty Pareto
improvements could not be consistently
- even when there aren’t pareto superior
comparison between states of affairs a choice
must be made
- Pareto has little to say about fairness that may
arise with externalities
- Separation between questions of efficiency
and distribution cannot be made, general
speaking.
- Welfare is not preference satisfaction, values
like freedom, justice or equality matters.
- willingness to pay, imperfect indication of
preference satisfaction
- cost-benefit can contribute useful information
to a social decision problem

Topics about Pareto

- Satisfying preferences has something to do

with promoting well-being

- Sometimes cost and benefits cannot be fully

register

- Efficiency in Pareto sense should not trump

over all moral considerations

- Pareto notions have little to bear on questions

of fairness