Efficiency criteria and welfare economics

Pareto's criterion is strict: a change is an improvement only if someone gains and nobody loses. Because most real policies create losers, economists also use the Kaldor-Hicks criterion: a change is an improvement if the gainers could compensate the losers and still be better off, even if no compensation is actually paid. Welfare economics then asks a bigger question: which of the many efficient allocations should society choose? Worked example: a policy gives A 100 and takes 60 from B. It fails Pareto (B loses) but passes Kaldor-Hicks, because A could pay B 60 and still keep 40.