Saturday, November 20, 2010

A new kind of Pareto optimality

Given any policy or allocation of resources, if one were to make a change to this policy or allocation, making at least one person better off without making anyone else worse off, the change is a Pareto improvement. If we keep making such Pareto improvements, we will reach a point at which no more improvements can be made. This is the point of Pareto optimality. In practice, it is likely that a person that is made worse off through a change in policy will be compensated monetarily, given some quantification of their worse position. This is how a lot of public policy is made. This may make sense from a neoclassical economic perspective, but it is such thinking that leads to people wanting to be compensated for interests that are clearly environmentally and socially harmful, or leads people to compensating other people with money for a harm that is incalculable. For example, monetary profits made from having a landfill close to people's residences might be divided in some part to people at those residences, to compensate for their distress at having the landfill close by.

But given continuing environmental harm, burgeoning populations all over the world, and the ever increasing size of human interventions in nature (larger dams, larger swaths of forest cleared for reaching oil sands, deeper mines), there is a likelihood that any choice that is potentially harmful to the environment and communities may have much larger consequences than in the past. However, it seems as if powerful interests are willing to increase monetary compensations so long as they can function viably. For example, the BP-Macondo Oil Spill in the Gulf of Mexico led to BP setting aside $20 billion to deal with settlement claims and cleaning the oil.

On an episode of Speaking of Faith (now known as Being), Jean Vanier talked about how it is essential that we lives our lives and make decisions with those most vulnerable among us at the centre of the decisions. Vanier gave the example of a new born child - the child is the most vulnerable member of a family or group, and once it exists, our decision making must accommodate the needs of this being. It is fascinating how this creature, although completely incapable of doing anything on its own, can control an entire group, its minds and hearts. This seems to throw a huge wrench in the Pareto way of thinking. Unfortunately, however, when it comes to how our governments and corporations make decisions today, it is the interests of not the most vulnerable among us, but the interests of the most powerful among us that are front and centre. Indeed, the Pareto condition is centred around those that are already well off compared to most of the rest. And then, there are the silent - nature and other living beings, who are potentially more vulnerable than the most vulnerable humans. What if we were to consider the interests of nature and ecosystems in the Pareto condition? If we are to constantly improve people's lives, can we do so without making the provider worse off?

V. Pareto

1 comment:

  1. dude u have to see the Zeitgeist-Addendum !