ABSTRACT
Scrutinizing Efficiency Italian economist Vilfred Pareto provided a well-accepted criterion for efficiency: Pareto efficiency is achieved if no one can be made better off without making at least one person worse off. Suppose you have two cans of soda and no pizza, and your friend has four slices of pizza and no soda. If you would both be happier with one can of soda and two slices of pizza, the initial allocation is not Pareto efficient. An exchange of one of your sodas for two of your friend's pizza slices would be mutually beneficial. If no additional change could make at least one of you better off without making the other worse off, you have achieved Pareto efficiency!
