not get jealous of one another. The following distributions are Pareto-efficient: However, a distribution where the mother gives each of them $2 and wastes the remaining $6 is not Pareto-efficient, because she could have given the wasted money to either child and made that child better off without harming the other. In this example, it was presumed that a child was made better or worse off by gaining or losing money, respectively, and that neither child gained or lost by evaluating her share in comparison to the other. To be more precise, we must evaluate all possible preferences that the child might have and consider a situation as Pareto-efficient if there is no other social state that at least one person favors (or prefers) and no one disfavors. Use in economics Pareto efficiency is often used in economics as a minimal sense of economic efficiency. If a mechanism does not result in Pareto-efficient outcomes, it is regarded as inefficient, since there was another outcome that could have made some people better off without harming anyone else. The view that markets produce Pareto-efficient outcomes is regarded as an important and central justification for capitalism. This result was established (with certain assumptions) in an area of study known as general equilibrium theory and is known as the first fundamental theorem of welfare economics. As a result, these results often feature prominently in conservative libertarian justifications of unregulated markets. Two examples Sen's original example Sen's original example used a simple society with only two people and only one social issue to consider. The two members of society are named "Lewd" and "Prude". In this society there is a copy of a Lady Chatterley's Lover and it must be given either to Lewd to read, to Prude to read, or disposed of unread. Suppose that Lewd enjoys this sort of reading and would prefer to read it himself rather than have it disposed of. However, he would get even more enjoyment out of Prude being forced to read it. Prude thinks that the book is indecent and that it should be disposed of unread. However, if someone must read it Prude would prefer that he, himself read it rather than Lewd since Prude thinks it would be even worse for someone to read and enjoy the book rather than read it in disgust. Given these preferences of the two individuals in the society, a