Briefly list and discuss in turn the three limitations of the Pareto c

Briefly list and discuss in turn the three limitations of the Pareto criteria.

What will be an ideal response?

ANSWER

The first limitation of the Pareto criteria is related to the fact that a Pareto improvement requires that no one be harmed. In a country as large and as complex as the United States, it will be nearly impossible to find a public policy that will not harm at least one individual. If taken literally, the Pareto criteria therefore seem of little practical use. The second limitation is that it suffers from a status quo bias. Since the starting point of evaluation of any Pareto superior move is the current situation, the status quo is given favoritism over a proposed change if the proposed change is not a Pareto superior move. If the status quo was arrived at unfairly, it is troubling to not be able to label a move towards fairness as a move towards increasing social welfare.