Pareto'S Futility Thesis

Pareto'S Futility Thesis-25
I’ll update as I go, in response to comments and criticism; this may create some difficulties reading the comments thread, but hopefully the improvement in the final product will be worth it.My first snippet is about The situation where there is no way to make some people better off without making anyone worse off is often referred to as “Pareto optimal” after the Italian economist and political theorist Vilfredo Pareto, who developed the underlying concept.The supposed constancy of income distribution implies that any attempt at redistribution must be essentially futile.

I’ll update as I go, in response to comments and criticism; this may create some difficulties reading the comments thread, but hopefully the improvement in the final product will be worth it.

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Pareto called this process ‘the circulation of elites’.

(Footnote: In his dystopian classic 1984, Orwell has the Trotsky-like character Emmanuel Goldstein present the same idea as the starting point of The Theory of Oligarchical Collectivism.

In ordinary language, describing a situation as “optimal” implies that it is the unique best outcome. Pareto, and followers like Hazlitt, seek to claim unique social desirability for market outcomes by definition rather than demonstration.

If that were true, then only the market outcome associated with the existing distribution of property rights would be Pareto optimal.

The egalitarian implications of the classical framework reflect the fact that the needs of poor people are more urgent than those of the better off.

So, the happiness of the community as a whole all be increased by policies that benefit the poorest members of the community, even if these benefits come at the expense of those who are better off.It follows that a substantial degree of income redistribution will be social desirable and that large accumulations of individual wealth, which contribute only marginally to the happiness of a small number of people are undesirable in themselves, though they may in some circumstances be a by-product of desirable policies.Pareto’s big achievement, further developed by a large number 20th century economists, was to show that much of economic analysis could be undertaken without invoking the concept of utility.Mill’s philosophical framework implied support for political democracy, including the enfranchisement of women.Since everyone’s welfare counts equally in the classical calculus, the political process should, as far as possible, give everyone equal weight.Conversely, if there is a positive opportunity cost for any benefit, then we can’t make anyone better off without making someone else worse off.So, a “Pareto optimal” situation may be described, more simply as one where all opportunity costs are positive.(Fn Supporters of Hayek and Mises commonly describe themselves as “libertarians”, but their alliance with brutal dictators makes a travesty of the term – they have been derisively described as “shmibertarian”).Now back to “Pareto optimality”, and why it is such a misleading term.Recognising the inappropriateness of describing radically unfair allocations as “optimal”, some economists have used the description “Pareto efficient” instead, but this is not much better.It corresponds neither to the ordinary meaning of “efficient” nor to the meaning with which the term is commonly used in economics, which is also misleading, but in a different way.

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