chapter  11
Pareto Optimality and the Law
Pages 20

To illustrate, if from a state of permissiveness with respect to smoking, a no-smoking order were intro­ duced, the CV of a nonsmoker who gains from the change of law would be measured as a maximum sum per period, say $20, this being the amount he is willing to pay to have the permissive law reversed. The E V measure would be a transfer to him o f some minimum amount, say $22 , in lieu of the contemplated no-smoking order. If, later, the no-smoking order were revoked the CV would be a payment to him of this minimum sum, $22, while the EV would be a maximum sum of$20. The smoker's welfare is affected in the opposite way, but the pattern is equally symmetric.