Posted by: Van Colombo | November 9, 2010

Do we make “Pareto efficient” decisions?

When we make decisions are they “Pareto efficient”

Pareto efficiency is a economic concept created by Italian Vilfredo Pareto. It consist of many strong points that we can study and adopt. Government economic policies are suppose to be Pareto efficient.

In a summary the concept is to make sure nobody being made worse off for a gain of another. Without knowing the terms and the concept most of our moves are Pareto efficient.

For an example if my daughters cricket coaching session is always the last session out of  7 slots. By pursuing the coach and my daughter to start up one hour earlier than the first slot will make all winners. This becomes a “Strong Pareto Optimum” allocation. Where neither party  made worse off. However it may not be practical. Coach may not prepared to have a earlier schedule.

By knowing early cancellation coach can do a “Pareto Improvement” by broadcasting availability to other players. However it would not be optimal if the player in the last session cannot make it to a empty session.

Want to read more ?


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: