SUMMARYThis article places special, but not exclusive emphasis upon those obstacles to the Pareto optimality of group behavior which arise from the imperfection of man's knowledge. Bounds upon Pareto optimal behavior are first discussed for three limiting ‘societies’—(i) a society in which all members are independent, (ii) one in which only one‐way dependencies can arise and (iii) one in which all members are completely interdependent. These cases give insights into non‐limiting ones. Next, account is taken of the fact that few groups exist in isolation and some formal conditions, which make it impossible for a group to ensure itself of Pareto optimality, are stated. It is speculated that these conditions often arise. Further, it is shown that Pareto optimality of group behavior is, among other things, limited by factors such as individuals’ imperfect knowledge of their own preferences, barriers to discovering the preferences of others, limitations imposed by the good faith of parties to agreement, the intrusion of emotional factors, e.g., in bargaining, false notions by individuals of their own predictive powers and the willingness of others to make concessions, and by other uncertainties about possible acts and the relationship between acts a