 Despite the practical importance of cost-benefit analysis, the technique and the justification for it sketched in the previous paragraph are problematic. One technical difficulty is that it is possible for S to be a potential Pareto improvement over R and for R to be a potential Pareto improvement over S (Scitovsky 1941, Samuelson 1950)! That means that the fact that S is a potential Pareto improvement over R does not imply that there is a larger economic “pie” in S than in R, because there cannot, of course, be a larger economic pie in S than in R and a larger economic pie in R than in S. A second problem is that willingness to pay for some policy and the amount one would require in compensation if one opposes the policy depend on how much wealth one has as well as on one’s attitude to the policy. Cost-benefit analysis weights the preferences of the rich more than the preferences of the poor (Baker 1975). It is possible to compensate roughly for the effects of income and wealth (Harburger 1978, Fankhauser et al. 1997), but it is bothersome to do so, and cost-benefit analysis is commonly employed without any adjustment for wealth or income.