Pareto Improvement

What is a 'Pareto Improvement'

A pareto improvement is a neoclassical economics, an action done in an economy that harms no one and helps at least one person. The theory suggests that Pareto improvements will keep adding to the economy until it achieves a Pareto equilibrium, where no more Pareto improvements can be made.

BREAKING DOWN 'Pareto Improvement'

In real-world economics, the Pareto improvement is often replaced by the Kaldor-Hicks improvement, of which Pareto improvements are a subset. A Kaldor-Hicks improvement is associated with cost-benefit improvements and is related in terms of actual dollars.

RELATED TERMS
  1. Pareto Efficiency

    An economic state where resources are allocated in the most efficient ...
  2. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies ...
  3. Pareto Analysis

    A technique used for decision making based on the Pareto Principle, ...
  4. Economic Efficiency

    A broad term that implies an economic state in which every resource ...
  5. Production Possibility Frontier ...

    A curve depicting all maximum output possibilities for two or ...
  6. Neoclassical Growth Theory

    An economic theory that outlines how a steady economic growth ...
Related Articles
  1. Markets

    Explaining Pareto Efficiency

    Pareto efficiency is an economic state where resources are allocated in the most efficient manner.
  2. Investing

    The Pareto Principle (80-20 Rule)

    The 80-20 rule states that 80 percent of the results are attributable to 20 percent of the causes. It is a guide that allows people to focus their efforts on the 20 percent that is important ...
  3. Entrepreneurship & Small Business

    Time Management Practices to Master Before Starting Your Own Business

    Learn how Pareto analysis, the ABC method, the Eisenhower method and the POSEC method can help small business owners effectively manage their time.
  4. Markets

    Is the U.S. Economy Really Improving?

    The U.S. economy might be improving for some, but not for the majority. Here's why.
  5. Markets

    4 Reasons Why Irrational Exuberance Lasts Awhile

    Discover four reasons why markets sometimes exhibit irrational exuberance and form asset bubbles and why those bubbles are so pernicious.
  6. Markets

    What Is Equilibrium?

    Equilibrium is a state of balanced supply and demand.
  7. Markets

    How to Improve Your Cash Flow in Manufacturing

    Here are 10 ways to to improve a manufacturer's cash flow.
  8. Markets

    What Is Economic Equilibrium?

    Economic equilibrium occurs when market supply is equal to market demand.
  9. Personal Finance

    What is a Leasehold Improvement?

    A leasehold improvement is an alteration made to a rented space that customizes the space for the tenant.
  10. Investing

    Top 10 Ways to Improve Your Business's Cash Flow

    Improving cash flow from receivables provides more capital for day-to-day operations and innovation. Here are 10 ways to do it.
RELATED FAQS
  1. Is Pareto Efficiency the same thing as perfect competition?

    Find out how a perfectly competitive market should lead to Pareto efficiency, at least according to standard neoclassical ... Read Answer >>
  2. How were the figures 80 and 20 arrived at in the 80-20 rule (Pareto Principle)?

    Read about the origins of the 80-20 rule, also known as the Pareto principle, and how to interpret the rule for future productive ... Read Answer >>
  3. How is the 80-20 rule (Pareto Principle) used in management?

    Learn how to correctly understand the 80-20 rule, also known as the Pareto Principle, and apply it to managerial activity ... Read Answer >>
  4. How is the 80-20 rule (Pareto's Principle) used in macroeconomics?

    Learn how the 80-20 rule was first used in macroeconomics to describe the distribution of wealth and how it is now used in ... Read Answer >>
  5. How is the 80-20 rule (Pareto Principle) used in portfolios?

    Learn how the 80-20 rule can be used in portfolio construction, as well other areas, and learn about the origins of Pareto's ... Read Answer >>
  6. What are some real-life examples of the 80-20 rule (Pareto Principle) in practice?

    Learn about the origins of the 80-20 rule and understand how it is applied in different areas including business, economics ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center