Pareto Improvement

I come to your place to trade my saxophone for your guitar. Just before I leave your flat, I notice a guitar-case lying on the ground. "Wanna throw in the case?" I say. You quickly agree: a guitar case with no guitar is useless, so handing it over helps me but doesn't hurt you.

A Pareto improvement is a re-allocation of resources that improves at least one person's life and doesn't make anyone else's life worse.

After I've gone, you suddenly realise that I might have a saxophone case lying around at home, and that it's probably not worth much to me now that I don't have a saxophone. You call me up and suggest I bring the saxophone case to the basketball game tomorrow. But the saxophone case is bulky, and bringing it to the game will mean carrying it on my knees on the bus, and also mean I have to go home before the game instead of going there straight from work.

It's probably true that the extra benefit you will get from the saxophone case is very much greater than the costs I will incur from bringing it to you. However, the re-allocation of resources is no longer a Pareto improvement, because it slightly-harms at least one person (i.e. me).

By most imaginable systems of morality, a Pareto improvement is necessarily a good thing: by definition it doesn't cause anyone any harm, so if it causes someone benefit, then really why not? But note that there are many other re-allocations of resources that most of us would agree are "good" but which aren't Pareto improvements. For example, if someone steals your saxophone and later gives it back, returning the saxophone is not a Pareto improvement - the thief is worse off after returning the instrument, even if most of us agree that that's the right thing to do.

Photo Credit/Matija Sundalic