I’m pretty sure that argument proves too much: A watermelon substitutes for some other watermelon that I might have bought, so my grocer is worse off because the value of their watermelons are now slightly lower.
You are right that finding a watemelon would also have pecuniary externalities, assuming you would have bought a watermelon if you hadn’t stumbled upon one.
Finding the watermelon would still be better than finding currency (assuming in both cases that what you found would not otherwise have been found or used by anyone else)--better by the value of one watermelon—but it would not be a Pareto-improvement.
I have a Dodge Charger and would rather have a plymouth fury. You have a plymouth fury and would rather have a dodge charger. We trade. That is a Pareto improvement.
I grew 30 cauliflower and only want 2 for personal consumption. You bought 10 dead laptops and from them assembled 5 working laptops, you only want one. You want some cauliflower, I want a laptop. We trade. That is a Pareto improvement.
I have time on my hands but I want money.. My employer wants some research done more than it wants $1000 which it has. They pay me to do the research for them. That is a Pareto improvement.
The facts that I cannot then do something else with my car, cauliflower, or time does not stop the side by side comparison of NOT trading with trading from being a Pareto improvement in any of these cases. It just means that a different set of other Pareto or non Pareto trades are available in the status quo ante and status quo after trades described above.
The facts that I cannot then do something else with my car, cauliflower, or time does not stop the side by side comparison of NOT trading with trading from being a Pareto improvement in any of these cases.
Agreed, although novalis, fortyeridania & I are referring to externalities rather than personal opportunity costs. And if I start taking every esoteric kind of externality into account, it’s pretty hard to think of a trade that doesn’t exert ripple effects through them.
I have a Dodge Charger and would rather have a plymouth fury. You have a plymouth fury and would rather have a dodge charger. We trade. That is a Pareto improvement.
A novalis/fortyeridania-type reply here would presumably be that the trade means I no longer buy a Charger and/or you no longer buy a Fury (or substitutes for those), which is the same kind of externality as if I no longer buy a watermelon because I found one. (A similar argument applies if instead of trading, at least one of us sells our car and buys something with the money.) That kind of argument seems to apply to nominally Pareto-improving trades in general, although I’m not sure how seriously to take it.
I’m pretty sure that argument proves too much: A watermelon substitutes for some other watermelon that I might have bought, so my grocer is worse off because the value of their watermelons are now slightly lower.
You are right that finding a watemelon would also have pecuniary externalities, assuming you would have bought a watermelon if you hadn’t stumbled upon one.
Finding the watermelon would still be better than finding currency (assuming in both cases that what you found would not otherwise have been found or used by anyone else)--better by the value of one watermelon—but it would not be a Pareto-improvement.
Thanks!
This leads me to wonder whether the ubiquity of externalities means no Pareto improvements exist in the real world.
Yoiks! Consider:
I have a Dodge Charger and would rather have a plymouth fury. You have a plymouth fury and would rather have a dodge charger. We trade. That is a Pareto improvement.
I grew 30 cauliflower and only want 2 for personal consumption. You bought 10 dead laptops and from them assembled 5 working laptops, you only want one. You want some cauliflower, I want a laptop. We trade. That is a Pareto improvement.
I have time on my hands but I want money.. My employer wants some research done more than it wants $1000 which it has. They pay me to do the research for them. That is a Pareto improvement.
The facts that I cannot then do something else with my car, cauliflower, or time does not stop the side by side comparison of NOT trading with trading from being a Pareto improvement in any of these cases. It just means that a different set of other Pareto or non Pareto trades are available in the status quo ante and status quo after trades described above.
Agreed, although novalis, fortyeridania & I are referring to externalities rather than personal opportunity costs. And if I start taking every esoteric kind of externality into account, it’s pretty hard to think of a trade that doesn’t exert ripple effects through them.
A novalis/fortyeridania-type reply here would presumably be that the trade means I no longer buy a Charger and/or you no longer buy a Fury (or substitutes for those), which is the same kind of externality as if I no longer buy a watermelon because I found one. (A similar argument applies if instead of trading, at least one of us sells our car and buys something with the money.) That kind of argument seems to apply to nominally Pareto-improving trades in general, although I’m not sure how seriously to take it.
I don’t think those are not externalities, they are changes in opportunity.