A policy or project is said to constitute a potential Pareto improvement if it can lead to a Pareto improvement. This occurs when the benefits of gainers from the policy or project exceed the losses incurred by the losers, so that they can potentially compensate the losers for their losses and still be better off. If this happens, nobody becomes worse off (the well-being of the losers is unchanged), while the some people become better off (the winners still gain from the policy) - we've achieved a Pareto improvement.

The criterion or potential Pareto improvement is often used in Cost-benefit analysis. Cost-benefit analysis is an important technique for project appraisal: the process of weighing the total expected costs against the total expected benefits of one or more actions in order to choose the best or most profitable option. ...