economist Vilfredo Pareto was one of the leaders of the Lausanne School
and an illustrious member of the "second generation" of the Neoclassical revolution.
Although only mildly influential during his lifetime, his "tastes-and-obstacles"
approach to general equilibrium
theory were resurrected during the great "Paretian Revival"
of the 1930s and have guided much of economics since.
was born in the year of people's revolutions at its epicenter --
Paris, 1848 -- to an Italian aristocratic family. His father,
a Ligurian marchese (marquis) and civil engineer, had fled
to Paris in 1835 in self-imposed exile, following the example
of Mazzini and other Italian nationalists. Vilfredo was the third
child (and first son) of his marriage to a Frenchwoman.
family returned to Piedmont circa 1858. Following his father's
footsteps, Vilfredo Pareto studied classics and then engineering
at the Polytechnic Institute of Turin. It was here that he
acquired his proficiency in mathematics and his basic ideas about
mechanical equilibrium that were to characterize his later contributions
to economics. After graduating at the top of his class in
1870, Pareto took his first job as a director of the Rome Railway
Company. In 1874, Pareto become the managing director of an
iron and steel concern, the Società Ferriere d'Italia in Florence.
in Florence was marked by political activity, much of it fuelled
by his own frustrations with government regulators. After
the Cavourist liberal government was replaced with a more interventionist
government in Italy in 1876, Pareto was quick to identify the vested
political interests that lay behind economic regulation, protectionism
and nationalization that proceeded. A democratic republican
and free-trader by instinct, Pareto deplored aristocratic and government
corporatism. He saw the new Italian parliamentary system as
a sham, a "pluto-democracy", a fig leaf for the naked power of the
nobility and the wealthy. He sided with the radical democratic
movements and the liberals whom,
he believed, would replace privilege with meritocracy, restore real
democracy, pursue free trade and true competition and promote social
welfare. Pareto ran unsuccessfully for office on an opposition
platform in the district of Pistoia in 1882.
In 1889, after
the death of his parents, Pareto changed his lifestyle. He
inherited the marchese title, but he never used it.
Instead, he quit his job, married a penniless Russian girl from
Venice, Alessandrina Bakunin, and moved to a villa in Fiesole.
From his retreat, he began writing numerous polemical articles against
the government and gave public lectures at a working man's institute.
He was quickly targeted as a troublemaker by the authorities.
Trailed by police, intimidated by hired thugs, his lectures were
often closed down and his applications for teaching jobs blocked. (incidentally,
being well-trained with the sword, a crack shot with a pistol and
equipped with an aristocratic sense of honor, Pareto never let himself
be physically intimidated).
brought him to the attention of Maffeo Pantaleoni, then
Italy's leading Neoclassical economist. A friendship sparked between
the two men, and Pantaleoni introduced Pareto to economic theory,
particularly the Walrasian
strand. Pareto, a quick learner with exceptionally good mathematical
aptitude, took to it immediately and published several theoretical
articles in the Giornale degli economisti.
In the meantime,
Léon Walras was looking
for someone to take over his chair in political economy at the University
of Lausanne in Switzerland.
Pantaleoni recommended Pareto to him -- "He is an engineer like
you; he is an economist not like you, but wishing to become like
you, if you help him." Walras and Pareto disagreed on many
economic policy issues such as free trade and the role of the State.
They also had opposing temperaments -- Walras was a timid, bourgeois
idealist while Pareto remained his caustic, disputatious, aristocratic
self. In spite of this, Walras decided that Pareto ought to
succeed him. Pareto was appointed in 1893, and his position
at Lausanne made permanent in 1894. Although courteous and
respectful to each other in public, Walras and Pareto did not get
along very well.
there were many people in Italy who were glad to see Pareto safely
hidden away in Switzerland. But from his new academic perch,
Pareto's nerve only increased. His attacks on the Italian
government continued in his monthly column to the Giornale degli
economisti and in foreign journals. He assisted and even
housed many socialists and radicals that had been chased out of
Italy (particularly after the 1898 May riots). When the Dreyfus
affair broke in France, Pareto put his poison to work against the
set himself to work, producing a three-volume edition of his lecture
notes, Cours d'économie politique (1896, 1897). This
was more than merely an restatement of the doctrines of the Lausanne School.
Interspersed with his presentations of pure economic theory were
numerous asides on methodology and applied economics and extensive
sociological observations. His recent reading of Karl
Marx and Social Darwinists
like Herbert Spencer leaves its
imprimatur. Mathematics was neatly relegated to footnotes
In the Cours,
his main economic contributions was his exposition of "Pareto's
Law" of income distribution. He argued that in all countries
and times, the distribution of income and wealth follows a regular
logarithmic pattern that can be captured by the formula:
log N = log A + m log x
where where N is the number of income earners who receive incomes
higher than x, and A and m are constants. Over the years,
Pareto's Law has proved remarkably resilient in empirical studies.
also troubled with the concept of "utility". In its common
usage, utility meant the well-being of the individual or society,
but Pareto realized that when people make economic decisions, they
are guided by what they think is desirable for them, whether
or not that corresponds to their well-being. Thus, he
introduced the term "ophelimity" to replace the worn-out "utility". Preferences
was what Pareto wanted to get at.
of the Cours was Pareto's criticism of the marginal productivity
theory of distribution, pointing out that it would fail in situations
where there is imperfect competition or limited substitutability
between factors. He'd repeat his criticisms in future writings.
Also of importance
was Pareto's observation that since the equilibrium is merely a
solution to a set of simultaneous equations, then it is at least
theoretically possible that a socialist or collectivist economy
could "calculate" this solution and so attain exactly the same outcome
as in a system guided by free markets. This proposition
was picked up and extended by Enrico Barone
and became the first shot of the famous socialist calculation
In a famous
1900 Rivista article, Pareto suddenly changed direction.
Heretofore a radical democrat, Pareto now decided to declare himself
an anti-democrat. The disturbances of the 1890s in
Italy and France led Pareto to realize that, far from restoring
true democracy, meritocracy and promoting social welfare, the radical
movements were really just seeking to replace one élite with
another élite, the privileges and structures of power remaining
intact. The struggle was not for a good society, but a squabble
among élites over whom exactly was to going to govern.
And the ideals and theories they claimed to fight for? Just
propaganda, Pareto declared, the way upwardly-mobile folks incite
the helpless, hopeless mob to take to the streets on their behalf.
For Pareto, humanitarianism, liberalism, socialism, communism, fascism,
whatever, were all the same in the end. All ideologies were just
smokescreens foisted by "leaders" who really only aspired to enjoy
the privileges and powers of the governing élite.
to have none of it -- and went on a crusade to expose the sham of
political ideology and doctrine. He condemned socialists of all
stripes roundly in a 1902 book, but took particular aim at logically
demolishing the "new gospel" of Marxian economics.
As revealed in the Cours and in his own introduction to an
abridged 1893 edition of Karl Marx's Capital,
Pareto applauded Marxian theories of class struggle and even thought
historical materialism was on the right track (albeit not deep and
general enough, in his view). But he deplored Marx's Wizard-of-Oz-like
conclusion. For Pareto, class struggle is eternal; the promised
"classless" society that would emerge under communism was merely
ideological fodder for socialist leaders to lay on their flock.
Of course, as a good Neoclassical, Pareto could not fathom
the labor theory of value either.
In 1906, Pareto
published his Manual of Political Economy, his magnum
opus on pure economics and moved him out of the shadow of Walras. Unlike
the Cours, the Manual concentrates on presenting pure
economics in an explicitly mathematical form (especially after it
was heavily revised for the 1909 French edition). The Walrasian
equations are still there, but the focus is on formulating equilibrium
in terms of solutions to individual problems of "objectives
and contraints". To illustrate this, the indifference
curve of Edgeworth (1881) was
employed extensively -- both in his theory of the consumer and,
another great novelty, in his theory of the
producer. It is in the Manual that we find the
first representation of what has since become known (and misnamed)
as the "Edgeworth-Bowley"
Fisher (1892), Pareto
stumbled on the idea that cardinal utility could be dispensed with.
Preferences were the primitive datum, and utility a mere representation
of preference-ordering. With this, Pareto not only inaugurated
modern microeconomics, but he also demolished the "unholy alliance"
of economics and utilitarianism.
In its stead, he introduced the notion of Pareto-optimality,
the idea that a society is enjoying maximum ophelimity when
no one can be made better off without making someone else worse
off. (for more details, see our discussion of the Paretian general
observations also begin to indicate the future course of his ideas.
In 1900, Pareto had entered into a brief controversy in the Giornale
degli economisti with Benedetto Croce. Croce had criticized
economists' positivistic approach, particularly the assumption of
"rational economic man". Pareto defended economists,
but, at the same time, realized that the conventional defense was
not even convincing enough to himself. Why did the predictions
of economics fail to correspond to reality? Why were its policy
recommendations, to him logically irrefutable, not adopted?
The explanation, he concluded, echoing Georges Sorel, was simply
that much of human activity was driven not by logical action, but
rather by non-logical action. On this, of course, economics
has nothing to say -- which is why, ultimately, economics will always
fail empirically. Pareto realized that he had to move beyond
economics to look for his answer.
from his chair at Lausanne in 1907, gradually passing on his teaching
responsibilities to Pasquale Boninsegni.
He moved to Villa Angora in Céligny, near Lake Geneva. There
he was nursing a heart disease, surrounded by a dozen cats, his
enormous personal library, a cellar full of superb wines and a large
cabinet of exquisite liquers. His wife ran off in 1901, but,
as an Italian citizen, he could not legally divorce her. A
Frenchwoman, Jane Régis moved in shortly afterwards, and they remained
devoted companions for the rest of his life. He only married her
in 1923, after he became a citizen of the city-state of Fiume and
thus overcame the legal obstacles to divorce.
his time at Céligny to write his Trattato di sociologia generale,
which was finally published, after wartime delays, in 1916.
This was his great sociological
masterpiece. He explains how human action can be neatly
reduced to residue and derivation. People act
on the basis of non-logical sentiments (residues) and invent justifications
for them afterwards (derivations). The derivation is thus
just the content and form of the ideology itself. But the
residues are the real underlying problem, the particular cause of
the squabbles that leads to the "circulation of élites". The underlying
residue, he thought, was the only proper object of sociological
non-logical sentiments, rooted in the basic aspirations and drives
of people. He identifies six classes of residues, all of which
are present but unevenly distributed across people -- so the population
is always a heterogeneous, differentiated mass of different psychic-types. The
most important residues are Class I the "instinct for combining"
(innovation) and Class II, the "persistence of aggregates" (conservation).
Class I types rule by guile, and are calculating, materialistic
and innovating. Class II types rule by force and are more
bureaucratic, idealistic and conservative.
of society claimed that there was a tendency to return to an equilibrium
where a balanced amount of Class I and Class II people are present
in the governing élites. People are always entering and leaving
the élite thereby tending to restore the natural balance.
On occasion, when it gets too lopsided, an élite will be replaced
en masse by another If there are too many Class
I people in a governing élites, this means that violent, conservative
Class II's are in the lower echelons, itching and capable of taking
power when the Class I's finally make a mess of things by too much
cunning and corruption (he regarded Napoleon III's France and the
Italian "pluto-democratic" system as an example). If the governing
élite is composed mostly of Class II types, then it will fall into
a bureaucratic, inefficient and reactionary mess, easy prey for
calculating upwardly-mobile Class I's (e.g. Tsarist Russia).
his sociological theory with numerous classical and contemporary
illustrations of his theory. He published two more books (1920,
1921) expanding on the theme. His quasi-mystical arguments
about the non-logical motivations attracted many Italian Fascists
(Mussolini himself claimed to have attended his lectures at Lausanne).
Pareto, however, was largely disdainful of the Fascist movement
-- he never had patience for ideologies or ideologues -- but he
found them quite amusing. When Mussolini's small band of Class
II Fascists marched on Rome in 1922 and brought the whole Class
I-dominated Italian government tumbling down, Pareto mumbled triumphantly
in his sick-bed, "I told you so!". He was not unhappy at the
turn of events.
showered Pareto with honors from afar, making him a Senator of the
Kingdom of Italy, inviting him to join the Italian delegation to
the Geneva Disarmament Conference, asking him to contribute to the
Fascist party periodicals, etc. He declined most of the honors,
but spoke favorably of certain early reforms undertaken by the Fascists.
However, he also warned them to avoid despotism, censorship and
economic corporatism. When the Fascists clamped down on freedom
of expression in Italian universities, Pareto managed to rouse himself
to write a protest.
a mere ten months into Mussolini's reign -- before the uglier aspects
of Fascism became obvious. The Fascists continued to
use his name unreservedly to give intellectual veneer to their movement.
Writing in 1938 on the legacy of Pareto, the economist (and Fascist)
would have the gumption to write (and Econometrica the editorial
lapse to publish) the following:
the weaknesses of the flesh delayed, but could not prevent, the
triumph of Saint Augustine, so a rationalistic vocation retarded
but did not impede the flowering of the mysticism of Pareto. For
that reason, Fascism, having become victorious, extolled him in
life, and glorifies his memory, like that of a confessor of its
faith." (Luigi Amoroso,
"Vilfredo Pareto", Econometrica, 1938: p.21)
association with Fascism, Pareto's sociological work has been taken
seriously, going through recurring phases of popularity and
critical scrutiny. Freudian psychology has given much weight to
some of his notions. It is not so much its main thrust, but
its roughness, simplicity and incompleteness that are the main sources
have had a much greater impact. Pareto managed to construct
a proper school around himself at Lausanne, including
and others as disciples. Outside this small group, his work
also influenced W.E. Johnson,
and Arthur Bowley. But
Pareto's big break came posthumously in the 1930s and 1940s, a period
which we have decided to call the "Paretian Revival".
His "tastes-and-obstacles" approach to demand were resurrected by
John Hicks and R.G.D. Allen (1934) and extended
and popularized by John Hicks (1939), Maurice
(1943) and Paul Samuelson (1947).
Pareto's work on welfare were resurrected by Harold Hotelling, Oskar
Lange and the "New Welfare
Economics" movement. Finally, Pareto's ruminations on
the potential efficiency of a collectivist society were aired in
the Socialist Calculation
Debate that arose between the Paretians and the
of Vilfredo Pareto
Fondamentali della Teorie dell' Elasticità, 1869.
- "Della logica
delle nuove scuole economiche", speech to Accademia dei Gerogofili,
économique", 1891, Revue des deux mondes
- "Les nouvelles
théories économiques", 1892, Le monde économique
sui principi fondamentali dell'economia politica pura", 1893,
Giornale degli Economisti.
to K. Marx, Capital,
d'économie pure à l'Université de Lausanne, 1893 (unpublished)
- "The Parliamentary
Regime in Italy", 1893, American Poli Sci Quarterly
- La liberté
économique et les événements d'Italie.
courbe des revenus", 1896, Le Monde economique (French/Italian)
d'économie politique professé à l'université de Lausanne,
3 volumes, 1896-7.
New Theories of Economics ", 1897, JPE.
se pose le problème de l'économie pure?", Notes to Association
Stella,1898 (publ. 1965)
- "Un' Applicazione
di teorie sociologiche", 1900, Rivista Italiana di Sociologia
(transl. in English as The Rise and Fall of the Elites)
- "On the
Economic Phenomenon", 1900, GdE (repr. 1953, IEP)
- "Le nuove
toerie economiche (con in appendice le equazioni dell' equilibrio
dinamico)", 1901, GdE
- "De l'économique,
discours d'installation de M.V. Pareto à professeur ordinaire",
Lausanne, 1901 (publ. 1965)
- Les systèmes
pure, resumé du cours donné a l'Ecole des Hautes Etudes Sociales
de Paris, 1902
of Aupetit", 1902, Revue d'econ politique
der Mathematik auf Nationalökonomie", 1903, Encyklopödie der
- "Il Crepuscolo
della Libertà", 1905, Rivista d'Italia.
of Political Economy , 1906 (Italian; French transl., 1909,
English transl, 1971).
et la sociologie au point de vue scientifique", 1907, Rivista
mathématique", 1911, in Gauthier-Villars, Encyclopedie des
- Le mythe
vertuiste et la littérature immorale. 1911
to G. Osorio, Théorie mathematique de l'échange, 1913.
di Sociologia Generale, 1916. (transl. in English as Mind
and Society. Extracts
(1) , (2),
extract in Spanish)
per il Giubileo", 1917, La Riforma Sociale - Jubillee speech manuscript
- "Formi di
fenomeni economici e previsioni", 1917, Riv di Sci Banc
e Teorie, 1920
della Democrazia, 1921.
- Mon Journal,
sociologici di Vilfredo Pareto, 1966.
complètes de Vilfredo Pareto, ed. G. Busino
- HET Pages:
Welfare, the Production
Decision, Marginal Productivity
Theory of Distribution
of Bortkiewicz's Anwendungen and Pareto's Anwendungen",
by Francis Ysidro Edgeworth, 1903,
of Pareto's Manuale di Economia Politica", by Philip
H. Wicksteed, 1906,
Contributions to Mathematical Economics, I & II", by Francis
- "Review of
Pareto's Cours d'économie politique, Vol. 1" by Georges
Le devenir social, Ann. 2, N. 5, May.
- "Review of
Pareto's Cours d'économie politique, Vol. 2" by Georges
Le devenir social, Ann. 3, N. 5, May.
of Pareto's Manuale di Economia Politica" by M. Halbwachs,
1906, L'année sociologique, Ann. 10
- "Review of
Jevons's Theory, Pareto's Manuel and Marshall's
Principles" by François Simiand, 1909, L'année sociologique,
of Pareto's Manuel d'économie politique" by E. d'Eichthal,
1909, Revue critique d'histoire et de littérature
- "Review of
Pareto's Traité de sociologie générale" by C. Bouglé,
1919, Revue historique
of Pareto's Traité de sociologie générale" by F. Bd.,
1919, Revue critique d'histoire et de littérature
d'études Paretiennes at Lausanne.
d'études interdisciplinaires Walras-Pareto at Lausanne
Fonds Pareto at CWP Lausanne
Fondo Pareto of the Banca Popolare de Sondria
of Oeuvres complètes de Vilfredo Pareto, ed. G. Busino
de Pareto at CWP Lausanne
of Pareto - in English.
Pareto: Concise Overview of His Life, Works, and Philosophy"
by Fr. James Thornton
- "Pareto in Toscana"
by Alberto Zanni, 1999, SdPE.
on Slutsky's Equation as Pareto's Solution", by C.E. Weber,
- "La raccolta
dei documenti di Vilfredo Pareto", by P. C. Ferrara, 1997
Pareto page at Dead Sociologists Index
Pareto page at Marxists.org
Pareto: Il Gioco del Potere?" by Franco Gianola
- Pareto dressed
as a Bedouin Arab on the way to a masked ball. (source)
Page at McMaster
Page at Akamac
Page at Laura Forgette
Primary and Secondary Works of Vilfredo Pareto at Bristol,
Page at R. Dixon, Melbourne
Pareto: L'Ecole de Lausanne - in French
- Essay on
- Other Images
of Pareto - (1), (2)
page at Britannica.com
Page (in French)