Legal Definitions - Pareto optimality

Pareto optimality is an economic concept that refers to a situation where no individual can be made better off without making someone else worse off. This means that any change that benefits one person must come at the expense of another person.

The term comes from the work of Vilfredo Pareto, an Italian economist and sociologist who studied the distribution of wealth and income in society.

One example of Pareto optimality is the distribution of resources in a society. If a government decides to allocate more resources to one group of people, it may come at the expense of another group. For example, if a government decides to increase funding for education, it may have to cut funding for other programs like healthcare or infrastructure.

Another example is the labor market. If an employer decides to increase wages for one group of workers, it may have to lay off other workers or cut back on benefits to maintain profitability.

These examples illustrate the concept of Pareto optimality because any change that benefits one group of people must come at the expense of another group. In other words, there is no way to make everyone better off without making someone worse off.