The John M. Olin Center
Paper Abstract
519. Louis Kaplow, Pareto Principle and Competing Principles, 08/2005; subsequently published in New Palgrave Dictionary of Economics, 2nd edition, 2008.
Abstract: The Pareto principle, the seemingly incontrovertible dictum that if all individuals prefer some regime to another then so should society, may conflict with competing principles. Arrow’s impossibility theorem and Sen’s liberal paradox are two notable examples. Subsequent work indicates more broadly that the Pareto principle conflicts with all nonwelfarist principles. This essay surveys these results, including various extensions thereof, and offers perspectives on the conflict, drawing on classical and contemporary work in political economy and economic psychology.