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In economics, this is called a Pareto improvement: http://en.wikipedia.org/wiki/Pareto_efficiency http://en.wikipedia.org/wiki/Pareto_efficiency The idea is th
by keithba 16y ago
In economics, this is called a Pareto improvement: http://en.wikipedia.org/wiki/Pareto_efficiency http://en.wikipedia.org/wiki/Pareto_efficiency
The idea is that if there are inefficiencies in a system (or market), we can create win-win situations by reducing the inefficiencies.
A classic and useful example of this is comparative advantage and opportunity cost (http://en.wikipedia.org/wiki/Comparative_advantage http://en.wikipedia.org/wiki/Comparative_advantage). Both parties can gain if they have different relative efficiencies, even if one party has an overall production advantage. (This is why countries will import goods and services they could produce domestically - it frees up resources to produce other stuff that they can produce more of.)
This is because it is inefficient to be good at everything you are good at all at once - the opportunity cost is too high relative to importing from someone else.
For instance, you may be better at coding (for instance, in Ruby or Python) and creating HTML/CSS from PSDs than anyone else, but since creating HTML/CSS from PSDs takes away time from coding, you can outsource the HTML/CSS creation to someone who may be slightly slower than you, but that's OK, since the opportunity cost for you is worth it: more time to code.
So - if you want to create a long-term win-win situation with another party - you should find out what you can produce for a relatively lower opportunity cost than they can, and then sell it to them. You will win, and they will win.
- akkartik 16y agoI was aware of the idea, but thanks for such a viscerally relevant example.
- deleted 16y ago[deleted]