![]() Most sociologists object to Paretian welfare economics because of its silence on the initial distribution of resources. The Pareto Principle (or 80/20 principle) is an important theory that states that 80 percent of events are caused by 20 percent of their causes. It has also been argued that they constitute a rather weak basis for welfare judgements, since they explicitly forbid interpersonal comparisons, are concerned entirely with the subjective choices of individuals, and privilege the position occupied by the status quo (since any move from the status quo which was vetoed by one person would not be considered a Pareto-improvement). 1 The concept is named after Vilfredo Pareto (18481923), Italian civil engineer and economist, who used the concept in his studies of economic efficiency and income distribution. Since these assumptions are empirically questionable, and probably embody value-judgements about well-being and satisfaction, they are somewhat controversial. Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The principle rests on three assumptions: that each individual is the best judge of his or her own welfare that social welfare is exclusively a function of individual welfare and that if one individual's welfare is augmented, and nobody's is reduced, then social welfare has increased. He found that the same principle could be applied to a whole range of different things in life and in particular economics. ‘Pareto optimality’ is said to exist when the distribution of economic welfare cannot be improved for one individual without reducing that of another. The Pareto Principle (also known as the 80/20 rule) was discovered by Italian economist Vilfredo Pareto who found it alarming that 80 of Italy’s property was owned by just 20 of the population. A market exchange which affects nobody adversely is considered to be a ‘Pareto-improvement’ since it leaves one or more persons better off. ![]() A principle of welfare economics derived from the writings of Vilfredo Pareto, which states that a legitimate welfare improvement occurs when a particular change makes at least one person better off, without making any other person worse off. Both phenomenon, supposedly, were observed in the early 1900s by Italian mathematician and engineer-economist Vilfredo Pareto. ![]()
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