Publication: Journal of Economic Education
Volume: Volume 22, No. 2
Issue: Spring 1991
Pages: pp. 172-178
Author(s): Vijay K. Mathur
Address (Principal Author):
Title: How Well Do We Know Pareto Optimality?
Abstract: Assuming an interior general equilibrium Pareto optimal distribution of given amounts of two goods among two persons in the society, associated with the given marginal rate of transformation (MRT), is it possible to find another such income distribution given that MRT: A review of some intermediate microeconomics texts reveals a great deal of ambiguity in the answers and explanations provided for this question. This paper shows that Samuelson's answer to the "transfer problem" provides a simple explanation for this question as well. It is also shown that the Samuelsonian condition for the unique Pareto optimal income distribution given the MRT, rests on the assumptions about the utility functions of consumers in the society.