 The other way that economists have found to extend the Pareto efficiency notions leads to cost-benefit analysis, which is a practical tool for policy analysis (Mishan 1971; Sugden and Williams 1978; Adler and Posner 2000, 2006; Broadman et al. 2010; Boadway 2016). Suppose that S is not a Pareto improvement over R. Some members of the society would be losers in a shift from R to S. Those losers prefer R to S, but there are enough winners — enough people who prefer S to R — that the winners could compensate the losers and make the preference for S′ (S with compensation paid) over R unanimous. S is a “potential Pareto improvement” over R. In other terms, the amount of money the winners would be willing to pay to bring about the change is larger than the amount of money the losers would have to be compensated so as not to object to the change. (Economists are skeptical about what one learns from asking people how much they would be willing to pay, and they attempt instead to infer how much individuals are willing to pay indirectly from market phenomena.) When S is a potential Pareto improvement over R, there is said to be a “net benefit” to the policy of bringing about S. According to cost-benefit analysis, among eligible policies (which satisfy legal and moral constraints), one should, other things being equal, employ the one with the largest net benefit. Note that the compensation is entirely hypothetical. Potential Pareto improvements result in winners and losers, the justice or injustice of which is irrelevant to cost-benefit analysis. Justice or beneficence may require that the society do something to mitigate distributional imbalances. Because there is a larger “pie” of goods and services to satisfy preferences (since compensation could be paid and everybody’s preferences better satisfied), selecting policies with the greatest net benefit serves economic efficiency (Hicks 1939, Kaldor 1939).