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jimmy comments on The Second Best - Less Wrong
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"In economics, the ideal, or first best, outcome for an economy is a Pareto-efficient one, meaning one in which no market participant can be made better off without someone else made worse off."
Nitpick - Pareto-efficient outcomes are, in real social systems, horrible, horrible outcomes, very far down the scale in terms of overall utility. They are by nature Utopian, and they fail the way Utopias fail. In a Pareto society, you can't do anything productive, because everything you do makes someone worse-off.
Pareto-efficient outcomes are used in economics only because they are mathematically convenient. It's like looking under a streetlamp for your keys because the light is better there.
A much better form of "optimal" outcome would be one cast in dynamic terms, that instead of saying "No transaction is allowed if there exists Y such that d(utility(Y))/dt < 0", would be to say that "No transaction is allowed such that the sum over all Y of d(u(Y))/dt < 0".
There is a large difference between "there are no more 'freebies' where we can make someone better off without hurting someone else" and "we will not allow a change if it hurts anyone at all".
The first is Pareto-efficient, the latter is a horrible idea.
Right, to demand a Pareto-efficient outcome is not to demand that all changes are Pareto-improvements.
PG is right to say that the society he describes is Pareto-efficient and awful, but it's not the only Pareto-efficient society.