Coasian analysis, Pareto optimality, and the Kaldor-Hicks variant

"Coasian [see n. 11 'Ronald Coase, The Problem of Social Cost, 3 J. L. & Econ. 44 (Oct. 1960). Coase won the Nobel prize in economics in 1991.'] analysis is concerned with efficiency, which starts with the Paretian criterion (named after political theorist Vilfredo Pareto [n. 14 Vilfredo Pareto, Manual of Political Economy (English trans. 1971, originally published in 1906).] 'state of affairs A is more efficient than state of affairs B if it leads to an improvement for one of the parties without harming any of the other affected parties; Pareto optimality occurs when no further gains can be achieved from trade. Paretian efficiency is, however, too demanding a criterion because in the real world (which we do not ignore); virtually every change in affairs will benefit some while harming others. Most analysts employ the Kaldor-Hicks variant, [n. 15 John R. Hicks, The Foundations of Welfare Economics (1939); Nicholas Kaldor, Welfare Propositions in Economics (1939).] which asks whether the gain from moving from B to A is large enough to compensate, in theory, all who lose from the change." In Defense of Theory: Notes on the Production of Legal Scholarship, by Samuel Estreicher, The Green Bag, Autumn 2006