Pareto efficiency also called Pareto optimality, a state of affairs in which no one can be made better off without making someone worse off. The Italian economist Vilfredo Pareto (1848–1923) referred to optimality rather than efficiency, but usage has drifted toward the less normative term. Pareto supposed that utilitarian addition of welfare across individuals is meaningless. He concluded that the only useful aggregate measures of welfare must be ordinal. One state of affairs is Pareto-superior to another if we cannot move to the second state without making someone worse off. Although the Pareto criteria are generally thought to be positive rather than normative, they are often used as normative principles for justifying particular changes or refusals to make changes. For example, some economists and philosophers take the Pareto criteria as moral constraints and therefore oppose certain government policies. In market and voluntary exchange contexts, it makes sense to suppose every exchange will be Pareto-improving, at least for the direct parties to the exchange. If, however, we fail to account for external effects of our exchange on other people, it may not be Pareto-improving. Moreover, we may fail to provide collective benefits that require the cooperation or coordination of many individuals’ efforts. Hence, even in markets, we cannot expect to achieve Pareto efficiency. We might therefore suppose we should invite government intervention to help us. But in typical social contexts, it is often hard to believe that significant policy changes can be Paretoimproving: there are sure to be losers from any change. See also PERFECT COMPETITION , SOCIAL CHOICE THEORY , UTILITARIANIS. R.Har.