A True Pareto Improvement

We economists love to talk about Pareto optima and Pareto-improving changes. Frankly, though, when the group of interested parties is considered broadly enough, there are extremely few changes that are truly Pareto-improving.

I just came across one.

I was scheduled for a seminar next week at the German research institute where I’m on sabbatical; it would have been my sixth seminar at this institute in five months. I’m tired of giving seminars here, so I offered to cancel my presentation.

It turns out that a young colleague was supposed to give a seminar at the same institute, but he was displaced by a visitor doing a job interview. He was happy to take my place; and I would bet that the audience and the other researchers here are quite sick of hearing me talk by now, so my cancellation makes them better off too. And I must be better off, otherwise I wouldn’t have made the offer. A rare event indeed!


I guess the number of situations where we can think of a potential Pareto Improvement is so low because usually people would already have used them in order to make everybody better off.

On the flipsid, it is very easy to think of situations in which we could make evrybody worse off - so there are many hypothetical situations in which pareto improvements are possible.


Unfortunately, if there is just one person in the audience who would prefer to hear your seminar rather than the young colleague (or skip the seminar altogether) than they have been made worse off, and so no Pareto improvement.


So is this a weak or a strong pareto optimum...?

Dan K.

While I appreciate the topic matter, when dealing in such micro cases (ie, an individual and another individual's personal dealings) Pareto improvements can be found all the time.

Bobby G

I'm with #2 and #4.

Maybe for society and you as two separate entities, this might be a Pareto improvement, but for each individual this likely isn't the case.

As for the frequency of Pareto improvements, isn't, say, every transaction at a grocery store a Pareto improvement? The grocer wants your money more than the product, and you value the product more than your cash, or else the transaction would never happen in the first place. Boom. Pareto improvement.

Daniel Reeves

What if the speaker was going to spend that time he wasn't going to spend speaking with a friend? Then if that friend enjoys his company, he's worse off.

Pareto improvements don't exist in actuality. But there are cases in which we might as well reduce the externalities and opportunity costs such that they exist in our slightly more simplified world.


I'm guessing that it is true, but it also depends what if the replacement speaker is not as knowledgeable about economic? Or if someone was just going to the seminar to hear Mr. Hamermesh? Like in everything in economics its depends.


It is very hard to find a situation in which Pareto Improvement is seen because, as #1 has already said, if there was this possibility, then one would have already done what was necessary to make everyone better off.
People, as rational human beings, always try to make everyone better off, but it is almost impossible to do such thing. I can only think of low-sized populations, where Pareto Improvement can be seen, like decide what to eat on a certain specific day (suppose your sister wanted to eat pasta and you wanted to eat pizza, but during the argument, you remembered of tacos, which you both like more, and then you end up eating tacos, both of you are better off). But, can someone give a large scale Pareto Improvement example?


I have an orange. You want to buy it for 5€. You want to sell it for 5€. We do the transaction.
Poor orange?
Pareto improving changes are everywhere.

Hilda CMS

It might be a win-win for Mr. Hamermesh and part of the audience but is it good for the institution? There must be a reason that provokes them to continue inviting Mr. Hamermesh . Also, since the alternative was someone young, they might not have as much experience with the topic and therefore not give such a complete presentation. This might also be false, who knows. Another thing is that, as #7 stated, maybe some people attend the presentation only because it is Mr. Hamermesh. Personally, I think it is not exactly a win-win situation.


@ #10
I do think it is a win-win because it provides Mr. Hammermesh with a break from the seminars, and it provides the people receiving the seminars with a substitute that is most likely equally effective. Marginal utility is probably hitting the low end for the people receiving the seminars at this institution. By consuming more of the substitute, marginal utility is increased.



Any time I go into a store and purchase a good is a parato improvement. I am better off otherwise I wouldn't have brought the good (it is highly unlikely that the price is my EXACT utility derived from the good, and if the price is greater than my utility, I will not buy it). And obviously the store is happy with the arrangement or they wouldn't have sold it.

Any time you hear the words "Win-Win" I think you could apply this.