View source for Pareto Optimality

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[[Category:Economics 101]]
[[Category:Common Fallacies Of Economics]]
{{DES | des = Pareto optimality is often an illusory hope. Markets can theoretically produce Pareto-optimal results, but there are plenty of reasons why they might not.  Nor do markets help us choose which Pareto Optimum we'd want of many possible optima.  Pareto improvements assume many things which are not true, such as that inequality doesn't matter. They also are frequently used in bait-and-switch: lump-sum transfers to make sure everybody benefits are often conveniently forgotten. And there are other solutions (including centralized solutions and naked coercion) which can also produce Pareto-optimal results | show=}}

A single market transaction results in a Pareto improvement for the two exchanging.  But if this transaction is instead of a transaction with a third party, then there is a significant loss to the third party if they have produced with expectation of exchange.  An economy of Pareto improving transactions can still have losers.  Every company that ever went out of business due to competition in a market is an example of how nothing but Pareto improvements still creates losers as conditions shift.

Nor are the initial conditions of markets (property) Pareto efficient.
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