Efficient Allocation
Stanley Reiter · The New Palgrave Dictionary of Economics · 2008
Analysis of efficiency in the context of resource allocation has been a central concern of economic theory from ancient times, and is an essential element of modern microeconomic theory. The ends of economic action are seen to be the satisfaction of human wants through the provision of goods and services. These are supplied by production and exchange and limited by scarcity of resources and technology. In this context efficiency means going as far as possible in the satisfaction of wants within resource and technological constraints. This is expressed by the concept of Pareto optimality, which can be stated informally as follows: a state of affairs is Pareto optimal if it is within the given constraints and it is not the case that everyone can be made better off in his own view by changing to another state of affairs that satisfies the applicable constraints.