Mr Johnson claimed that Pareto improvements are the underlying economic thinking behind levelling up and closing the huge regional gaps in Britain. Pareto’s insight was that it is possible to redistribute assets in a way that makes some people better off without anybody else losing out. It suggests that the Government should be able to share out resources more effectively across the country and create no losers – only winners. Reaching this point is known as Pareto optimality.
The Prime Minister said: “If you insist on the economic theory behind levelling up, it is contained in the insight of Vilfredo Pareto, a 19th century Italian figure who floated from the cobwebbed attic of my memories.”
The usual use of the insight is the other way around.
If you find something that makes some people better off without making anyone worse off then you should do it. For such a Pareto improvement increases human welfare, obviously enough.
The thing is, there’s no particular insistence that such things or policies exist. Rather, it’s that if they do then they’re good things to do. It’s also not particular to assets or to government handing them out. Imagine that we had a bureaucracy that existed only to shuffle paper, nothing useful was done by it. The cost is that time that everyone has to spend shuffling paper to feed the bureaucracy. Abolish the bureaucracy and paper shuffling declines and nothing else does. A Pareto improvement.