The Korean Journal of Economic Studies
Pareto Efficiency and Equality
Suk Ho Kim (Seoul National University)Year 2015Vol. 63No. 4
Pareto’s Law of income distribution accepts a certain level of inequality asnatural, while Pareto Efficiency is known to have a trade-off relationship withequality. Both indicate Pareto’s conservative nature. Nevertheless, he has aprogressive side as well in his pursuit of equilibrium. Pareto claimed thatcirculation of elite is essential for a well working economy. An economy withsevere income inequality in which wealth and poverty are transmitted acrossgenerations would not function well. Economic growth may lessen inequalitydynamically. Efficiency and equality can be in a virtuous cycle.