An Evolutionary Efficiency Alternative to the Notion of Pareto Efficiency
Irene van Staveren ()
Authors registered in the RePEc Author Service: Geoffrey M. Hodgson ()
Economic Thought, 2012, vol. 1, issue 1, pages 6
The paper argues that the notion of Pareto efficiency builds on two normative assumptions: the more general consequentialist norm of any efficiency criterion, and the strong no-harm principle of the prohibition of any redistribution during the economic process that hurts at least one person. These normative concerns lead to a constrained and static notion of efficiency in mainstream economics, ignoring dynamic efficiency gains from more equal allocations of resources. The paper argues that a weak no-harm principle instead provides an endogenous efficiency criterion, which shifts attention away from equilibrium analysis in hypothetically perfect markets towards an evolutionary analysis of efficiency in real-world, non-equilibrium markets. Moreover, such an evolutionary notion of efficiency would be less normative than the Paretian concept.
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