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joeteicher comments on The Second Best - Less Wrong
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Comments (53)
'Perfect competition' is utter nonsense. Not only is it impossible, there is also nothing intrinsically desireable about it.
And Pareto-Superior conditions are also nonsense. There is no non-arbitrary way to compare utilities of separate actors. What makes someone 'better' or 'worse' off is entirely subjective, and not at all subject to arithmetic comparison or external validation/invalidation.
A pretty key aspect of pareto-efficiency is that there are no interpersonal utility comparisons. A pareto-improvement is an improvement that makes at least one person better off (by their own standards) while making no one worse of (by their own standards). Even if a trade makes one person much, much better of and another person only a tiny bit worse off, that is not a pareto-improvement. Any situation like that can usually be made into a pareto-improvement by having the person who is made much better off give some enough money to the person who is made worse off that they are no longer made worse off.
Whether something is a 'cost' or a 'benefit' is itself entirely subjective.