The Problematics of the Pareto Principle
The Pareto Principle asserts in one form that an outcome which is unanimously preferred by individuals should be chosen by society; or in another form that an outcome should be chosen if it is preferred by at least one individual and the remaining members of society are indifferent. It is little wonder that this principle, which has the ring of a self-evident truth, has been the “gold standard” for law and economics. Despite its appeal, however, the Pareto Principle has limitations that are irrelevant in some spheres such as corporate law, but that may have serious import for fields such as constitutional law, family, and bioethics. Some of these limitations stems from conflicts between autonomy and welfare norms; others from bounded rationality; still others from ambiguities in the definition of “preference” or from inherent limitations on mechanisms for public choice. The Pareto Principle remains a useful rule of thumb, but it should not be followed blindly in all settings.
Economics | Jurisprudence | Law and Economics
Date of this Version
Daniel A. Farber, "The Problematics of the Pareto Principle" (August 18, 2005). bepress Legal Series. bepress Legal Series.Working Paper 698.