Gil Skillman writes in reply to me: Well, yes and no. Yes, pareto efficiency is essentially blind to distributional issues, and perforce to redistributional moves. No, that doesn't make it absolutely unhelpful. I didn't say it was *absolutely* unhelpful, just profoundly so. Having accomplished the redistribution, if one could still change social conditions so as to make everybody better off, why not do it? Or just one person better off and no-one worse off, yes, why not indeed--*having achieved a reasonable distribution of resources in the first place*. But Pareto efficiency as you concede doesn't care about whether one has achieved a reasonable distribution. So, it would be a Pareto improvement to make a filthy rich dictator ten times better off than he is already, while 99 percent of the population continue to be malnourished (though no worse than before). (Here I am making the not very realistic assumption that the 99 percent wouldn't be worse off as a result of intense resentment at the dictator's vastly increased wealth). Designating this sort of thing as an *improvement* in *efficiency* is, I still think, profoundly unhelpful--it makes it look as if places like Zaire have become more "efficient" over the past year or so. The problem comes back to one I raised some days ago on pen-l and which James Craven has written extensively about in this forum. Efficiency is only a meaningful notion in relation to some presupposed goal, and not every goal will provide us with a reasonable understanding of what is efficient. If the goal is to make most people a bit better off or to give them a minimally decent standard of living even at the expense of a few already well-off people becoming somewhat though not drastically worse off, then assessments of efficiency improvements will be different from those laid down by the Pareto notion of efficiency, where implied goal is to make at least one person better off without making anyone worse off regardless of the current status of anyone in particular. If the goal is maximizing the well-being of the worst off, then Pareto improvements need not be efficient relative to that goal. Pareto efficiency obscures the question of what it is that we should go about efficiently trying to realize. Or to put it the other way around: Settle the distributional question first. At that point, would you be willing to say that necessarily no important political economic questions remain? For instance, if the Sudan somehow managed to achieve perfect income inequality, would its economic task be complete? In practice, in the context of formulating and implementing a national economic policy, the chance to make someone better off and *no-one* worse off rarely arises as a genuine concrete political economic question, even in the Sudan. What may arise is whether a long-term policy that involves some people being made worse off in the short-to-medium term will result in pretty much everyone being better off in the long run. (The IMF loves that sort of thing--the way to prosperity is for most people to reduce their living standards except the rich who should be made richer, or so they keep telling everyone). But a strict application of the Pareto notion of efficiency is unlikely to be a good guide to national economic policy. Peter [EMAIL PROTECTED]
