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That's not a pareto efficient distribution. The efficient option would be for the person with bread to sell bread to the person without bread in exchange for f
by jjk166 5y ago
That's not a pareto efficient distribution. The efficient option would be for the person with bread to sell bread to the person without bread in exchange for future labor.
Pareto efficiency is defined to be an economic state where resources cannot be reallocated to make one individual better off without making at least one individual worse off. If a redistribution can make things better, it is not an efficient state.
- whimsicalism 5y ago> The efficient option would be for the person with bread to sell bread to the person without bread in exchange for future labor. Okay, with work, let's say they are given the bare minimum to survive and they will get their work done (no rational reason to offer a higher wage). It would still be welfare enhancing to re-distribute. > If a redistribution can make things better, it is not an efficient state. This is just straight-up false, no other comment. Not what Pareto efficiency. The redistribution makes the person taken from worse off.
- jjk166 5y agoIf they both have the bare minimum to survive, redistributing from one to the other puts the first below the minimum. If someone has a surplus, the efficient thing is to trade it. If they don't, redistribution hurts them as much as it helps another. There is no free lunch. Again, that is the definition of pareto efficiency.
- whimsicalism 5y ago> If someone has a surplus, the efficient thing is to trade it. With only two people, the most efficient thing to do is to trade it for the bare minimum the other person needs to survive. Beyond that is not Pareto efficient.
- jjk166 5y agoYes, you give someone the bare minimum they need to survive. Then they want more. Now you're back to the situation where you have a surplus and they're willing to trade, the efficient thing is to trade your surplus. Continue repeating until one of you dies of old age, and the remaining survivor has all the bread. So long as you have surplus, and that surplus has value, it makes sense to trade it, rather than have it sit idle.
- whimsicalism 5y agoYes, someone living their entire life on subsistence amounts of bread while the other person has a great 3 meals a day is not a welfare optima.
- jjk166 5y agoI don't think you're understanding this. As long as person A has more bread than they're going to eat, and person B still wants more bread, it is still optimal to trade. A well fed individual can do more labor than a minimally fed person who can in turn do more labor than a dead person. As person B's quality of life improves, they are in an ever better position to trade. The bread is worthless to person A, it doesn't matter how little person B gives for it, it is still optimal. It does not become Pareto efficient until person A is worse off by trading bread, by which point they no longer have enough to completely satisfy their needs.