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Pareto, Vilfredo

Pareto, Vilfredo

I CONTRIBUTIONS TO ECONOMICSMaurice Allais

works by pareto

supplementary bibliography

II CONTRIBUTIONS TO SOCIOLOGYTalcott Parsons

works by pareto

supplementary bibliography

I CONTRIBUTIONS TO ECONOMICS

Vilfredo Pareto (1848-1923), Italian economist and sociologist, was born in Paris. His father, Raphael Pareto, a follower of Mazzini, had been exiled from Genoa in 1836 by the ruling house of Savoy and had gone to France and taken a French wife. It was only in 1858, ten years after Pareto’s birth, that an amnesty enabled his father to return to Italy.

Pareto began his education in France, but he accompanied his father back to Italy and continued his schooling there; his secondary studies were mainly mathematical and classical. His formal education was completed at the Polytechnic Institute in Turin, where he finished his engineering studies at the age of 21 with a thesis entitled “Principi fondamentali della teoria dell’ elasticità . . .” (1869). From 1870 to 1892, Pareto worked as an engineer. He also served as a director of two Italian railways.

His career as an economist stemmed from a chance meeting with Pantaleoni. Studying Pantaleoni’s Pure Economics led him to reread Walras. Although he had at first been rather indifferent to Walras’s work, on rereading it he was much impressed by the theory of general economic equilibrium. In 1891 he met Walras, who was considering resigning his professorship at Lausanne University. Walras was very pleased to have at last found someone capable of understanding the scope and importance of his work and suggested to Pareto that he might become his successor. In 1893, Walras did retire, at the age of 58, and Pareto, who was 45, succeeded him.

This date marks the beginning of Pareto’s scientific career, in the course of which he produced a number of books, all of remarkable quality: theCours d’économie politique (1896-1897), the Systemès socialistes (1902-1903), the Manuale di economia politica, which appeared in 1906 and was published in French, with various improvements, as Le manuel d’économie politique in 1909, and the Trattato di sociologia generate, which appeared in Italian in 1916 and in a French version in 1917-1919.

In 1898, on the death of an uncle, Pareto inherited a substantial fortune and moved to the town of Celigny, in Switzerland. From 1900 he led a reclusive life there, devoting himself wholly to his work and leaving Switzerland only rarely. Shortly before his death he was appointed a member of the Italian senate by the fascist government.

Until he was about 50 years old, Pareto was inspired by the liberal approach to political economy. Democracy, liberty, free trade, and humanitarianism were his panaceas for the plagues of militarism, protection, and religion. As time passed, experience, growing objectivity, and a broader view of history brought changes in his point of view. From about 1900 his impassioned and intransigent partisanship slowly gave way to a more somber, pessimistic, and skeptical attitude. Perhaps the best description of this intellectual change is Pareto’s own: “I was totally unaware that my reasoning was only an attempt to give logical clothing to beliefs which were fundamentally of an emotional nature” (letter to Antonucci, December 7, 1907, in Bousquet 1960, p. 26). In 1900 he wrote to Pantaleoni that there had once been a time when his desire was to straighten the limbs of the halt but now he laughed at their infirmity.

This change of viewpoint had no effect on Pareto’s style or manner. His mind had room for two very different personalities, the lucid, cold, precise scientist and the eager, incisive polemicist who was given to sarcasm and did not hesitate to subject his opposition to merciless disdain.

The determining influences on Pareto’s scientific career were his knowledge of mathematics, his immense erudition in matters connected with ancient Greece and Rome, and his twenty-year practice as an engineer. (A proof of his excellence in mathematics is the paper “Sur les fonctions génératrices d’Abel,” which he submitted to Leopold Kronecker and which was published in 1892.) His contact with Walras’s theory of equilibrium served to trigger his subsequent brilliant accomplishments. Pareto always frankly acknowledged Walras’s decisive influence on the direction of his thought, even after their personal relations had been strained by differences over ideology.

Pareto’s fundamental contributions to economics are contained in three publications, the two-volumeCours, the Manuel, and the article “Économie mathematique” (1911a) in the Encyclopédie des sciences mathématiques. The Systèmes socialistes and to an even greater degree the Trattato, although primarily sociological in emphasis, contain a considerable amount of analysis that extends and completes the material in the basic economic works.

Pareto’s economic writings

“Cours.” Pareto’s aim in the Cours was “to provide an outline of economic science considered as a natural science based exclusively on facts” (1896-1897, p. iii). Two ideas dominate the book: that of successive approximation and that of the interdependence of economic and social phenomena.

The Cours consists of the material on which Pareto based his lectures at the faculty of laws of the University of Lausanne. It is divided into two parts: the first (75 pages) is devoted to the exposition of the principles of pure political economy, and the second (780 pages) covers applied economics. The section on pure economics provides a first-approximation treatment of the phenomena studied which permits the general conditions of economic equilibrium to be set forth. These conditions provide the foundation for the successive approximations developed in the remainder of the book. For Pareto the theory of general equilibrium was the key to understanding the interdependence of economic and social phenomena.

His exposition of the principles of pure economics is in the tradition of Walras, but Pareto’s text is far superior to Walras’s in clarity and pertinence. The outstanding feature of the Cours is the way it combines theoretical analysis with discussion of a large amount of statistical and factual material and the use (mainly in notes) of mathematical techniques.

The Cours appears to have been the first text in political economy to be so richly garnished with facts and statistics. Pareto’s erudition and the wealth of knowledge he had accumulated are striking: he was able to illustrate his theories not only with contemporary examples but also with numerous other pertinent examples, particularly from Greek and Roman antiquity.

Nevertheless, Pareto’s Cours has some major defects. In the first place, it is an improvisation. Coming to economics at the age of 45, Pareto had not had time to refine his thinking when he wrote the Cours. The analysis of some subjects—for example, credit—is inadequate. Second, many interesting suggestions, such as the illustration of dynamic growth by a “pursuit curve” (courbe de poursuite, sec. 41) are not followed through. Third, the Cours, like all of Pareto’s other books, is badly organized; for example, it treats monetary questions before studying production phenomena. Finally, Pareto was somewhat prone to argue a normative point of view. In the Cours he was still too often the committed liberal, although it is clear that the change to his later attitude was under way.

Yet if the Cours is an improvisation by a beginner, it is by a beginner of exceptional ability. It can still be read with profit for the insight it gives into many interesting questions.

“Manuel d’économie politique.”

Among his economic writings the Manuel d’économie politiqueis Pareto’s magnum opus. It is better conceived and, more important, much better thought through than the Cours. It is basically a work of synthesis in which Pareto presented a general theory of economic equilibrium which is considerably more refined than Walras’s.

The first two chapters are devoted to a powerful analysis of the nature, scope, and limits of theory in the social sciences. The next four chapters deal with economic equilibrium. Their central argument is that individuals try to satisfy their needs as best they can, given the limitations imposed by the scarcity of available resources and the boundaries of existing knowledge. Two further chapters contain a special analysis of the three factors of production—labor, natural resources, and capital—and a discussion of the role of money. In the last chapter, entitled “The Concrete Economic Phenomenon” (“Le phénomène économique concret”), the aim is to examine the relation between theory and reality, with emphasis on protection, economic cycles, and the sociological implications of life in society. The basic sociological idea is that human activity can take either of two different paths, the production or transformation of economic goods or the appropriation of goods produced by others. Pareto refused to commit himself on the question of protection: he considered it destructive of resources but also wrote that “in some cases protection could be compensated by other factors” ([1906] 1966, p. 682). He viewed economic cycles as merely a particular case of the general rhythm of economic and social phenomena and contended that they cause less damage than is generally attributed to them and that the phenomena observed during crises are wrongly considered to be their cause.

The main text is 539 pages long, and it is followed by an appendix of 132 pages, in which mathematical techniques are used to throw further light on the theories presented in the body of the book. To the modern economic theoretician the appendix is Pareto’s fundamental contribution, especially from the standpoint of the theory of general economic equilibrium and the theory of situations of maximum efficiency.

“Économie mathématique.”

Only the first part of Pareto’s encyclopedia article on mathematical economics was published; World War I prevented publication of the remainder, and all trace of it has been lost. The article generally covers the same ground as does the mathematical appendix to theManuel but is more concise and carries certain analyses much further, and the superiority of the article to the Manuel makes the loss of the second part especially regrettable.

Contributions to economic thought

There are at least five fundamental areas in economic thought in which Pareto’s work represents a breakthrough: the definition of economic science, the integration of economic phenomena into the whole of social phenomena, the definition of index functions and the theory of demand, the establishment of the foundations of the theory of maximum efficiency, and the law of distribution of income.

Economics as a science

Pareto’s greatest achievement is his illuminating presentation of the methodological basis of economics as a science. First, he enunciated a general theory of scientific theories, with economic theory and sociology as special cases. His work here is fully comparable to Henri Poincaré’s in the physical sciences but has the added merit of covering the social as well as the physical sciences. For Pareto the only source of knowledge is observation of facts. Abstraction is necessary for the analysis of facts, and theory provides a simplified image of reality which preserves its essential features. Mathematics is merely an extraordinarily perfected extension of logic, to be used when required, but only then. The whole of Pareto’s work, from the Cours to the Trattato, is studded with shrewd observations on scientific methodology, the philosophy of science, and the science of economics. Unfortunately these observations are dispersed throughout his work; an overview of them can be found in the first two chapters of the Manuel, but this gives only a limited impression of the scope of his thought. The essential features of Pareto’s philosophy of science can perhaps be found in the Trattato.

Second, Pareto applied his philosophy of science throughout his work, both in developing theories and in relating theories to facts. Thus, he clearly explained the link between the static and the dynamic and showed that the static is only a phase—but a necessary phase—of the dynamic. The study of facts and the development of theories to represent and explain facts were his dominant preoccupations. Each argument in the Cours is illustrated by many historical and statistical references. Irving Fisher, writing in the Yale Review, said of it quite accurately: “No other work contains such a compact, varied and comprehensive collection of statistical data” (1896, p. 327). In his later work Pareto’s interest shifted from the analysis of statistical data to the analysis of historical and sociological phenomena.

Last, Pareto critically examined an immense quantity of pseudo-scientific theories. His Systèmes socialistes, in which he subjected the logical inconsistencies of socialist economic theories, particularly Marxist theory, to a rigorous analysis, is an excellent illustration of this aspect of his critical work, which received its fullest expression in the Trattato.

Economics as part of a larger structure

An important feature of Pareto’s work is his integration of economic theory into the wider framework of the social sciences; his main objective was to generalize Walras’s theory of general economic equilibrium to cover the entire range of social phenomena. Pareto’s guiding principle was the interdependence of economic and social phenomena. For him economic theory was but part of a much greater whole; its study was necessary, but not sufficient, for understanding society.

Index functions and the theory of demand

Pareto was the first to make a clear distinction between the concepts of cardinal utility and ordinal utility, which he designated respectively by the terms “total ophelimity” (ophélimité totale) and “index function” (fonction indice). He showed that the theory of economic equilibrium can be developed without recourse to a cardinal index of utility, using only the concept of the index function (or ordinal utility). He was the first to present a general theory of demand that showed how the empirical laws of demand can be derived theoretically from material furnished by introspective reasoning.

Pareto’s exposition is sometimes difficult to follow because he used different methods of presentation and systems of notation at different times; he also occasionally used the same notation for both ordinal and cardinal utility. In the following discussion the notation used corresponds as closely as possible to that of Pareto’s encyclopedia article, with modifications to avoid confusion. For clarity a bar is used to distinguish quantities relating to cardinal utility from quantities relating to ordinal utility. Thus, φ denotes ordinal utility, and φ̄ denotes cardinal utility; φ and φ̄ are the partial derivatives of φ and φ̄ with respect to x.

Ordinal index. Pareto’s point of departure in the Manuel, Appendix, section 1, is the fact that to each set x, y, z, . . . of quantities consumed, an infinite number of psychologically equivalent sets can be made to correspond, whence the concept of the index function,

defining an indifference surface. Then φ is denned by the simple condition that the consumption pattern (x2,y2, z2, . . .) is preferred to (x1, y1, z1, . . .) if φ2 > φ1. Under this definition, any increasing function of φ only,

also satisfies this condition (1906, p. 541). It is clear that φ is nothing other than ordinal utility as the term is understood and employed by Englishspeaking economists. Pareto observed that knowing the function φ provides full awareness of the economic psychology of the individual concerned.

As Pareto pointed out, Edgeworth’s starting point was the notion of ophelimity (cardinal utility), which was assumed to be known although its definition presented considerable difficulty. Pareto attacked the problem from the other end, starting with the concept of indifference surfaces (“a concept directly derived from experience”). He wrote in “Économie mathématique” (1911a, sec. 15, note 25, p. 609), “The term line of indifference’ was introduced into the literature by F. Y. Edgeworth (Mathematical Psychics, p. 21), who assumed the existence of ophelimity and deduced the lines of indifference from this. V. Pareto (Manuel d’économie politique, p. 540) inverted the problem, deducing the unknown from the known.”

Today this approach to the problem is considered almost self-evident, but at the time it represented a considerable step forward in the exposition of economic theory.

Cardinal index. Pareto went on to show that if cardinal utility, φ̄, exists, φ̄ is necessarily one of the functions F(φ), since the function φ̄ = a constant should represent an indifference surface (1911a, sec. 15).

Pareto derived properties of the cardinal index, φ̄ = φ̄(x, y, z, . . .), by psychological introspection and distinguished three cases: (a) If φ̄xy = 0, the goods x and y are independent. (By definition, φ̄xy = ∂2φ̄/∂xy.) (b)If φ̄xy > 0, the goods are dependent and the dependence is of the first type (complementary goods), (c) If φ̄xy < 0, the goods are dependent and the dependence is of the second type (substitutable goods).

In a rather obscure and not particularly convincing way, Pareto deduced that in the case of independent or complementary goods the second differential,

is negative regardless of dx, dy, dz,. . . (1906, Appendix, sees. 47-49; 1911a, sec. 17). From this it should follow that (shown here in the case of three goods)

In fact, the negative sign of d2φ̄ can be derived from the hypothesis of “diminishing psychological returns” (Allais 1943, p. 170).

Pareto never tried to establish a definition of complementary and substitutable goods that would be free of the arbitrary element involved in transformation (2), and he failed to specify what happens to the conditions (4) when they are written in terms of the ordinal utility index, φ. (This has since been done by Allais, in 1943, pp. 137-152.) Nevertheless, he must be credited with having introduced the use of second differentials and definite forms into economics; all subsequent research bears witness to the interest in this contribution.

General laws of supply and demand. In the Appendix to the Manuel and in the encyclopedia article, Pareto gave a general theory of demand which enables the various elasticities of demand to be calculated on the basis of the equilibrium equations

where 1, py, pz,. . . represent the prices of the good x (money) and the goods y, z, . . . (1906, sec. 52, p. 579; 1911a, sec. 32, p. 628).

By differentiating these equations Pareto obtained a linear system of n equations from which the unknowns dx, dy, dz, . . . can be calculated as functions of given changes dpy,dpz, . . . in prices. He showed that the quantities ∂y/∂py, ∂z/∂pz, . . . can easily be expressed as a function of the determinant

and its minors and set out the expressions which he had already given in 1892 in the Giornale degli economisti.

Pareto showed what happens to these relations when the goods are independent (1911a, sec. 33; 1906, sec. 53); in this case the conditions

imply that if a good y is demanded, the demand for it falls when its price rises.

Pareto showed that contrary to Marshall’s assertion, the marginal utility of money, m, varies when prices change, and thus it is clearly wrong to consider m a constant (1906, Appendix, sec. 56). He also showed, in a rather elegant demonstration (1911a, sec. 23), that if the elasticity of demand with respect to different goods is constant, then its value is unity. This is evidently a very restrictive condition. Pareto added, “There is no sign of corresponding research in Marshall’s Principles of Economics. . . and consequently the results at which he arrives are incomplete, and in part erroneous” (ibid., note 31, p. 620).

Pareto further showed, in a subsidiary analysis (1896-1897, sec. 83), that Marshall and his successors were wrong in estimating the consumer’s gain from exchange—that is, consumer’s surplus—by the curvilinear triangle formed by the demand curve. He showed very simply that this procedure is exact only if the marginal utility of money is constant, a condition that is generally not satisfied.

What Pareto failed to perceive was that when the conditions (4) are satisfied the consumer’s equilibrium is stable but that stable consumer equilibrium does not necessarily imply that at the equilibrium point the conditions (4) hold (see, for example, Allais 1943, pp. 468—469).

Pareto also did not perceive that production functions can be defined analogously to indifference surfaces; had he seen this, he could have developed a production theory along the same lines as the theory of consumer’s demand and supply. Nevertheless, his theory of the laws of supply and demand is a remarkable accomplishment.

Theory of maximum efficiency

Of all Pareto’s contributions to economic thought the most important is his rigorous construction of the foundations of the theory of maximum efficiency of economic management, or maximum ophelimity for a society. (English-speaking economists know this concept as optimum resource allocation. The expression is not a particularly happy one, for the word “optimum” carries an inappropriate implication.)

Pareto’s thinking on the theory of efficiency gradually became more precise. The theory was foreshadowed in the Cours (1896-1897, vol. 2, note 721, pp. 92-94) but appeared in its definitive form only in the appendix to the Manuel ([1906] 1966, pp. 655-656) and in the 1911 article in the Encyclopedie (1911a, pp. 624-625) and was given its final expression in the Trattato (1916, sees. 2128-2131).

Pareto defined a situation of maximum efficiency (1906, chapter 6, sec. 33, and Appendix, sec. 89; 1911a, sec. 28) as one in which it is impossible to increase the index function of one individual without decreasing that of some other individual. According to this definition, a situation of maximum efficiency is one in which any index function is a maximum subject to (a) the condition that the index functions of the other consumers be maintained at given levels and (b) the ruling production functions.

This definition of a situation of relative maximum had, in fact, already been given by Edgeworth in his Mathematical Psychics. Defining equilibrium for n participants in exchange, Edgeworth wrote: “The state of equilibrium may be considered as such that the utility of any one contractor must be a maximum relative to the utilities of the other contractors being constant, or not decreasing . . .” (1881, p. 27).

However, having defined situations of relative maximum perfectly, Edgeworth used his definition only in the analysis of stable equilibrium, without perceiving the contribution it could make to the study of situations of maximum efficiency. Had he taken this additional step, he would have demonstrated the fundamental theorem of the equivalence of a state of economic equilibrium and a state of maximum efficiency.

It is difficult to know whether Pareto consciously made use of Edgeworth’s definition. He read Edgeworth’s book in 1892 (see Lettere a Maffeo Pantaleoni, letter dated January 31, 1892), but a careful study of Pareto’s successive texts suggests that he arrived at his definition of maximum efficiency (maximum d’ophélimité pour la société) by his own route.

Pareto also gave a rigorous definition of surplus. He observed that if the index functions are not comparable, the quantities δφ/φx are, since they represent the quantity of the good x which would produce an increment δφ over the initial situation. Thus, the gain in terms of x corresponding to any change in the economy as a whole is given by

where the φ1, φ2, . . . are the index functions of the different individuals and τσa is the corresponding equivalent gain or distributed surplus in terms of good a (1906, Appendix, sec. 127; 1911a, sec. 28).

It is clear that there can be maximum efficiency in the sense of the definition only when

for any virtual displacement compatible with the constraints.

It was this approach to the definition of the maximum of ophelimity which, for the first time in the history of economic thought, enabled the problem of efficient management of an economy to be posed correctly—i.e., independently of the price system or the social structure of the economic system being considered, which could be based on private or collective property. This simple and natural definition contains the seeds of all the subsequent developments in the field. It provides a rigorous foundation for the general theory of economic optima—the management optimum, the population optimum, and the capitalistic optimum. It eliminates from the argument what was a major obstacle, the arbitrary nature of the distribution of income (1896-1897, vol. 2, pp. 91-92).

Pareto went on to develop a line of argument, somewhat lacking in rigor (ibid., sees. 720-726; 1906, chapter 6, sees. 33-61, and Appendix, sees. 145-152), which showed that a state of maximum efficiency and a state of equilibrium under perfect competition are one and the same thing (theorem of sec. 723 of the Cours and sees. 146 ff. of theManuel). This led to his deduction that the problems to be solved in realizing a situation of maximum efficiency, as well as the solutions to these problems, were the same for a collectivist economy as for an economy based on private property.

Pareto’s demonstration in the Manuel is incomplete and in part erroneous. Average cost and marginal cost are confused; no distinction is made between differentiated production sectors, in which, from a physical point of view, the best production technique consists of n distinct production units, and the nondifferentiated sector, in which the best production technique involves a single production unit; no account is taken of time and therefore of interest; second-order conditions are neglected; and the exact conditions for validity of the theorem are not stated. Nevertheless, this analysis is the foundation for all future developments in the field.

Walras believed, mistakenly, that he had demonstrated the equivalence of a situation of maximum efficiency and a situation of equilibrium in an economy under perfect competition. Actually, he had not even succeeded in developing a rigorous presentation of the problem of maximum efficiency for a society. In the Trattato, Pareto identified Walras’s error in a failure to distinguish between the maximum ophelimity obtainable by an individual undertaking transactions in the market with given resources and the problem of the maximum of ophelimity for the collectivity (1916, sec. 2128, note 1).

Having developed expression (8) for surplus, Pareto naturally deduced its first differential,

but he did not attempt to calculate the second differential, although it must be considered in the study of the stability of equilibrium and in the study of the second-order conditions for situations of maximum efficiency (the general expression for the second differential, d2σa appears in Allais 1943, pp. 612-616).

Unfortunately, Pareto dodged the main issues in the admittedly extremely complex question of the distribution of income. He stated in the Cours(1896-1897, vol. 2, sec. 720, p. 91) that his sole focus of interest was the conditions of production which “produce the maximum of ophelimity,” it being taken for granted that the goods produced “are distributed according to whatever rule it is desired to adopt.” This assumption, however, neglects an essential aspect of the analysis: even if the conditions of maximum efficiency are realized in the production system, it is not true in general that optimum efficiency in distribution is realized under any system of distribution whatsoever. This is clearly shown in the line of reasoning developed by Edgeworth (see Myint 1948; Little 1950; Samuelson 1950). In fact, Pareto simply evaded the problem of income distribution.

In the Trattato, Pareto generalized the maximum of ophelimity for a collectivity for the most general case (1916, sees. 2128, 2131-2139). The most important part of the text appears in a note, extracted from an article of Pareto’s in Giornale degli economisti (1913), “II massimo di utilita per una collettivita in sociologia.” This note is of extreme significance both for social theory in general and for the theories of collective choice and planning in particular. Pareto wrote:

The quantities δφ1, δφ2, . . . are heterogeneous. They cannot be added together, for such an addition would be meaningless. . . . The aim of considering the quantities

is to avoid the difficulties which arise from the fact that the ophelimities δφ1,δφ2, . . . are heterogeneous, by rendering them homogeneous and their summation [eq. 10] meaningful. . . . Were there another method to render the heterogeneous quantities δφ1, δφ2, . . . homogeneous . . . for example by multiplying them by certain positive quantities α1, α2, . . . it is evident that consideration of the sum

would give results analogous to those obtainable by considering equation (8). . . .

Furthermore, in this way there are as many equations (12) as there are individuals, i.e.

. . . In order to make these quantities homogeneous, they must be multiplied in their turn by certain coefficients . . . determined with a specific objective in mind such as, for example, the prosperity of the collectivity. . . . Now, using these coefficients, the quantities corresponding to equations (13) have been rendered comparable; they may be added after multiplication by , . . . to give

(1916, vol. 1, pp. 1341-1342, sec. 2131, note 1; to clarify the exposition, Pareto’s text has been altered slightly by the introduction of the indexes V1, V2, V3, . . . , W, and equation numbers have been changed to follow the sequence in this article)

It is then possible to consider W the collective preference function as it is seen by the government, whereas the Vi are the collective preference functions as they are seen by individual citizens.

In the text of the same section Pareto asserted:

. . . the public authorities have necessarily to compare the different utilities; for present purposes the criteria on which they do so may be ignored. In imprisoning a thief, for example, the authorities weigh the sufferings imposed on him against the utility accruing to honest citizens, estimating that the utility will at the very least compensate the suffering. If it were not so, they would let him stay free. . . . It goes without saying that the authorities bring into the comparison as best they can—often, it is true, not a very good best—all the utilities of which they have awareness, (ibid., pp. 1342-1343)

These remarks are relevant not only to social issues but also to all economic decisions made by the public authorities, including taxation and planning. As Pareto suggested, it is incorrect to distinguish economic from social issues; what holds for one holds for the other (ibid., sec. 2131, note 1).

Pareto then added: “The aim of the definition [of optimum collective ophelimity] is to substitute rigorous considerations in place of the vague and imprecise expressions normally used, whose indeterminacy renders them fallacious” (ibid., sec. 2132).

Pareto’s analysis {ibid., sees. 2121-2139) illuminates the nature of governmental economic decisions, particularly planning, and is the best introduction to the modern analysis of collective decisions. He showed with admirable clarity that there is no such thing as the general interest or, for that matter, a social optimum, since the indexes Vi and W are not and cannot be identical.

If, to use the above notation, the collective indifference function can be written

and if it is assumed that, as is generally the case, W is an increasing function of the Vi, it can be seen that whatever the function F is, W cannot be a maximum unless each of the Vi is at a maximum for fixed values of the other Vi. It thus follows that study of situations of maximum efficiency in the Paretian sense is useful and necessary even though the function W is not specified.

Pareto apparently did not see the crucial significance of his contribution. He devoted only 7 out of the 586 pages in the Cours to this question, 15 out of the 691 in the Manuel, 2 out of the 49 in the encyclopedia article, and 11 out of the 1761 in the Trattato.

Pareto’s law

Elements of Pareto’s law of the distribution of income and wealth appeared in several publications in 1895, 1896, and 1897; these have been collected by Busino (see Pareto, Écrits sur la courbe de la répartition de la richesse). An over-all statement was presented in the Cours in 1897 (1896-1897, vol. 2, sees. 957-965, pp. 304-326). Extensive verbal comments are given in theManuel (1906, chapter 7, sees. 3-31, pp. 381-393).

The mathematical expression of Pareto’s law, according to his own formulation, is

where N is the number of incomes above a certain value R, and A and α are constants. Income, x, is assumed to remain above a minimum, h, the corresponding value of N being

Hence

Thus, Pareto’s law is nothing else than the ordinary negative exponential distribution, truncated at the left to log h. In his controversy with Edgeworth

(see Busino’s Introduction to Pareto’s Écrits sur la courbe de la répartition de la richesse), Pareto strongly underlined the necessity of this truncation.

A considerable number of distributions of income are represented with a fair degree of accuracy by this law. The value of α is stable or varies only slightly over time in the same country; it has generally remained between 1.5 and 2 during the past few centuries.

Some distributions are satisfactorily fitted only after the introduction of two further constants, α and β:

a formulation which was proposed by Pareto as early as 1896.

The constant α, which is generally very small, if not zero, may be interpreted as compensating for the earned income allowance (abattement à la base) characteristic of income taxation statistics. The constant β is also generally very small.

Pareto supplied many examples for which the law (eq. 16) appears to provide an adequate fit and gave values of α of similar orders of magnitude. He commented that these were very remarkable results and that it was absolutely impossible to accept them as merely chance results.

In a formula that is perfectly clear when stated mathematically but is rather obscure in its verbal form and has therefore given rise to erroneous interpretations (1896-1897, vol. 2, sees. 964, 956; 1906, chapter 7, sec. 24), Pareto indicated that the inequality diminishes with an increase in the ratio of the number of persons whose income is below x to the number of persons whose income is above x. According to Pareto, this definition involves declining inequality of incomes with the growth of the quantity

where h is the minimum income. If Pareto’s law (16) is exact, we have

and since x > h, it can be seen that income inequality declines as α rises. Contrary to an opinion held by some writers, Pareto’s definition is not at all inconsequent. Although he calculated the total value, R, of incomes above x (1896-1897, vol. 2, sec. 961, note 1), Pareto failed to see the very suggestive interpretation attaching to his law of income distribution (eq. 17); in fact, it can be shown that if m(x) represents the average of those incomes which exceed a given income x, then, applying Pareto’s law (eq. 16).

If it is assumed that individuals’ assessments of the degree of income inequality vary as m(x)/x, the fact that the ratio is constant can in turn be interpreted as meaning that the assessment of the degree of inequality is the same whatever the level of income, x. The coefficient

can then be taken as an index of inequality, and Pareto’s law is open to a very simple interpretation.

Pareto tried to prove in several of his works (ibid., sec. 962; 1906, chapter 7, sec. 15) that the distribution of incomes is not random, but the argument he used is inexact. He submitted that the law of income distribution does not reduce to an error distribution and so cannot be regarded as a chance outcome. Unfortunately, although it is true that the normal law cannot be used to fit the distribution of income, a lognormal law generally fits quite adequately. In other words, the logarithm of income follows the error distribution.

Several authors (Gibrat, among others) have suggested use of the lognormal distribution to represent the distribution of income. This gives good results, particularly in those cases where Pareto’s law does not provide a good fit; conversely, Pareto’s law often gives good results where the lognormal distribution does not provide a good fit. Thus, there are many distributions which are well fitted either by Pareto’s law or by the lognormal distribution.

Pareto’s law has been subjected to a great deal of analysis. In general, the research has shown that Pareto’s law can be applied successfully to a considerable number of distributions, and it has confirmed Pareto’s basic result, namely the relative stability of the coefficient α over space and over time for the different societies studied.

The constancy of income inequality which can be deduced from Pareto’s law has significant sociological implications. If inequality is independent of the economic system, the socialistic attempt to diminish it is irrelevant, and the only way to improve the lot of low-income groups is to increase the efficiency of production. Pareto was quite willing to exploit this result, a fact which goes a long way to explain the heated controversy to which his law has given rise. In fact, the coefficient a is not a constant but generally varies between 2 and 3, and thus the socialist thesis has some value.

Although Pareto’s law is only a minor part of his over-all scientific contribution and, furthermore, is a purely empirical finding, the demonstration of the existence of a quite invariant factor in the structure of human societies is of indubitable importance. Schumpeter commented very aptly: “Few if any economists seem to have realised the possibilities that such invariants hold out for the future of our science. . . . nobody seems to have realised that the hunt for, and the interpretation of, invariants of this type might lay the foundations of an entirely novel type of theory” ([1949] 1965, p. 121 and note).

Influence of Pareto’s economic ideas

Pareto’s influence on the development of economics as a science was felt only after considerable delay and has largely been confined to Italy and France. His economics have influenced such Italians as Barone, Pietri-Tonelli, Pantaleoni, Amoroso, Demaria, and Fossati, but outside Italy few writers explicitly claim to be in his direct tradition. Allais is the only French author to locate himself directly in Pareto’s line of thought; Allais’s pupils Boiteux, Debreu, Malinvaud, Lesourne, Nataf, and Verhulst, among others, also show the influence of Pareto.

His work has had little effect in the English-speaking world; according to Schumpeter, “This might seem surprising owing to the fact that several important developments in theoretical economics are now seen to stem from him. But it is not difficult to explain. Pareto was the product of a sector of the Franco-Italian civilisation that is far removed from English and American currents of thought” ([1949] 1965, p. 111). Pareto complained to Edgeworth in 1896 that his work was not duly appreciated in Britain. The Trattato (translated in 1935) is still the only one of his books to appear in English. (Walras was in a similar position for a long time.) Nevertheless, his ideas have been widely drawn upon, too often without explicit acknowledgment of their origin. No English-speaking economist acknowledges Pareto as his master, although Hicks, Hotelling, Lange, Lerner, Samuelson, Koopmans, Dorfman, Arrow, and others have been influenced by his work.

Pareto’s influence in economics was considerably diminished by the ideological implications of his work. His vigorous attacks on democracy, his cogent criticism of socialist systems and of socialist leaders in power, did not endear him to left-wing intellectuals, who by general, if tacit, consent seem to have chosen to ignore his work.

At few points in his career could Pareto count on a sympathetic reception from the official circles responsible for Italian economic policy. The best he could expect was lack of understanding; more often he had to face hostility.

Pareto’s erudition, critical faculty, creative imagination, and talent for synthesis were exceptional. He set himself the tasks of integrating the phenomena of economics into the fabric of social reality, generalizing Walras’s theory of general economic equilibrium, and establishing a general theory of social life based on the analysis of facts. He was never able completely to realize this ambition, either formally or substantively. Each of his books consists of juxtaposed disparate elements, held together only by his constant desire to distinguish the subjective from the objective, to base his examination solely on facts, to look everywhere for the regular patterns underlying the apparent diversity of social phenomena. Yet his specific analyses—all of them suggestive—are excellent. His work can be compared to a palace whose general architecture is unsatisfactory but each of whose rooms contains some valuable artistic features.

The economic universe in which Pareto worked was too vast to be exhausted by the efforts of one man. He did not have time to follow all the new paths he had opened up. Nor did he have time to polish his output, and the exposition of his thinking contains several glaring faults. A great deal of progress has since been made in the various fields he opened up, and apart from questions of scientific methodology, much of his work is out of date. But this fact does not diminish the exceptional importance of his contribution.

With Walras and Irving Fisher, Pareto may be regarded as one of the three founders of modern economic science. The three, although very different, have much in common. Walras and Fisher, like the early Pareto, were ardent champions of normative ideas, and in all three the scientist struggled with the crusader. They were either ignored or hated, especially by their compatriots, but the reputations of all three are now rising.

Pareto was a man of exceptional talent, able to master the most varied disciplines and to further the progress of science in each. Although he was intellectually isolated, his influence on economics is clearly identifiable. His thinking is continually becoming more relevant to the solution of current problems, and its contribution to one of the most powerful theoretical approaches in contemporary thought is increasingly appreciated. He was a firstclass thinker, and his work constitutes a milestone in the history of thought. He has left us an imperishable heritage.

Maurice Allais

[See alsoEconomic equilibrium; Income distribution, article onsize; Statics and dynamics in economics; Utility; Welfare economics; and the biographies ofPantaleoniandWalras.]

works by pareto

1869 Principi fondamentali della teoria dell’ elasticità . . . . Unpublished thesis, Polytechnic Institute, Turin.

(1887-1899a) 1965 Libre-échangisme, protectionnisme et socialisme. Geneva: Droz.

(1887-1899b) 1965 Le marché financier italien, 1891-1899. Geneva: Droz. → See especially the Introduction by Giovanni Busino.

(1892) 1966 Sur les fonctions génératrices d’Abel. Pages 31-64 in Vilfredo Pareto, Statistique et économie mathématique. Oeuvres complètes, Vol. 8. Geneva: Droz. → First published in Volume 110 of Journal für die reine und angewandte Mathematik.

(1894) 1966 Introduction à Marx. Pages 33-70 in Vilfredo Pareto, Marxisme et économie pure. Geneva: Droz. → First published in the French edition of Marx’s Das Kapital, edited by P. Lafargue.

(1896) 1965 La courbe de la répartition de la richesse. Pages 1-15 in Vilfredo Pareto, Écrits sur la courbe de la répartition de la richesse. Geneva: Droz.

(1896-1897) 1964 Cours d’économie politique. New ed. Oeuvres completes, Vol. 1. Geneva: Droz. → See especially the Introduction by Georges H. Bousquet and the Bibliographical Note by Giovanni Busino. The first edition was published in two volumes.

(1898) 1966 Tables pour faciliter l’application de la méthode des moindres carrés. Pages 89-118 in Vilfredo Pareto, Statistique et économie mathématique. Oeuvres complètes, Vol. 8. Geneva: Droz.

(1902-1903) 1965 Les systémes socialistes. 3d ed. Oeuvres complétes, Vol. 5. Geneva: Droz.

(1906) 1966 Le manuel d’économie politique. 4th ed. Oeuvres complètes, Vol. 7. Geneva: Droz. → First published in Italian.

(1911a) 1966 Économie mathématique. Pages 319-368 in Vilfredo Pareto, Statistique et économie mathématique. Oeuvres completes, Vol. 8. Geneva: Droz. → First published in French in Volume 4 of Encyclopédie des sciences mathématiques pures et appliquées. An English translation appeared in 1955 in Volume 5 of International Economic Papers.

1911b Le mythe vertuiste et la littérature immorale. Paris: Rivière.

1913 II massimo di utilità per una collettività in sociologia. Giornale degli economisti 3d Series 46:337-341.

(1916) 1963 The Mind and Society: A Treatise on General Sociology. 4 vols. New York: Dover. → First published as Trattato di sociologia generale. Volume 1: Non-logical Conduct. Volume 2: Theory of Residues. Volume 3: Theory of Derivations. Volume 4: The General Form of Society.

1920a Fatti e teorie. Florence: Vallechi.

(1920b) 1966 Transformazione della democrazia. 2d ed. Bologna: Capelli. → A collection of articles first published in the Rivista di Milano between May and July 1920.

Carteggi Paretiani, 1892-1923. With a Preface by Gabriele de Rosa. Rome: Edizioni di Storia e Letteratura, 1962.

Écrits sur la courbe de la répartition de la richesse. Geneva: Droz, 1965. → Articles collected by Giovanni Busino. See especially the Introduction by Busino.

Lettere a Maffeo Pantaleoni, 1890-1923. 3 vols. Edited by Gabriele de Rosa. Rome: Edizioni di Storia e Letteratura, 1962. → See Volume 3, pages 473-542, for a bibliography of Pareto’s works.

Marxisme et économie pure. Geneva: Droz, 1966.

Mon journal. Padua: CEDAM, 1958. → A photographic reproduction of Pareto’s handwritten text.

Mythes et idéologies de la politique. Oeuvres completes, Vol. 6. Geneva: Droz, 1966. → Contains articles first published between 1891 and 1929. See especially the Introduction by Giovanni Busino.

Scritti sociologici. Turin: Unione Tipografico-Editrice Torinese, 1966.

Statistique et économie mathématique. Oeuvres completes, Vol. 8. Geneva: Droz, 1966. → Contains articles written between 1892 and 1911.

supplementary bibliography

This section of the bibliography is divided into three parts, listing works on Pareto, on Paretian economic theory, and on Pareto’s law.

PARETO

Amoroso, Luigi 1938 Vilfredo Pareto. Econometrica 6: 1-21.

Aron, Raymond 1961 Les grandes doctrines de sociologie historique. Volume 2: Emile Durkheim, Vilfredo Pareto, Max Weber. Paris: Centre de Documentation Universitaire.

Bousquet, Georges H. 1925a Introduction aux Systémes socialistes de Pareto. Paris: Giard.

Bousquet, Georges H. 1925b Précis de sociologie d’après Pareto. Paris: Payot.

Bousquet, Georges H. 1927 Introduction à I’étude du Manuel de V. Pareto. Paris: Giard.

Bousquet, Georges H. 1928a Vilfredo Pareto, sa vie et son oeuvre. Paris: Payot. → See pages 27-28 and 219-227 for bibliographies of Pareto’s works and works on Pareto.

Bousquet, Georges H. 1928b The Work of Vilfredo Pareto. Minneapolis, Minn.: Sociological Press.

Bousquet, Georges H. 1949 Pareto sociologue. Revue d’économie politique 59:545-554.

Bousquet, Georges H. 1959 Bibliographie complete de tous les travaux connus jusqu’à ce jour de V. Pareto. Unpublished manuscript, Univ. of Genoa.

Bousquet, Georges H. 1960 Pareto (1848-1923): Le savant et l’homme. Études et documents pour servir à l’histoire de l’Université de Lausanne, Vol. 7. Lausanne (Switzerland): Payot. → See page 200 for a bibliographical list of works on Pareto.

Bousquet, Georges H. 1963 Pareto et ses Systèmes socialistes. Institut de Science Économique Appliquée. Cahiers Série BA No. 2, (Supplement):25-32. → Also published as Publication mensuelle No. 134.

Boven, Pierre 1912 Les applications mathématiques à l’économie politique. Lausanne (Switzerland): Rouge.

Bresciani-Turroni, C. 1939 Annual Survey of Statistical Data: Pareto’s Law and the Index of Inequality of Incomes. Econometrica 7:107-133.

Busino, Giovanni 1965 Matériaux pour servir à l’étude de la pensée politique et sociale de Vilfredo Pareto. Cahiers Vilfredo Pareto nos. 7/8:111-135.

Busino, Giovanni 1966 Introduction à une histoire de la sociologie de Pareto. Geneva: Droz.

Demaria, Giovanni 1949 L’oeuvre économique de Vilfredo Pareto. Revue d’économie politique 59:517-544.

Fisher, Irving 1896 [A Review of] La courbe de la répartition de la richesse, by Vilfredo Pareto. Yale Review 5:325-328.

Fossati, Eraldo 1949 Pareto dans son et notre temps. Revue d’économie politique 59:585-599.

Gide, Charles 1917 Le jubilé Vilfredo Pareto. Revue d’économie politique 31:426-433.

Hughes, H. Stuart (1958) 1959 Consciousness and Society: The Reorientation of European Social Thought, 1890-1930. London: MacGibbon & Kee. → A paperback edition was published in 1961 by Vintage.

In memoria di Vilfredo Pareto. 1924 Giornale degli economisti e rivista di statistica 4th Series 64:1-153.

Michels, Robert 1927 Bedeutende Männer: Charakterologische Studien. Leipzig: Quelle & Meyer. → Contains a biographical study of Pareto, among others.

Moret, Jacques 1915 L’emploi des mathématiques en économie politique. Paris: Giard & Brière.

Nell’ anniversario della nascita di Vilfredo Pareto: 15 luglio 1848-19 agosto 1923. 1948 Giornale degli economisti e rivista di statistica New Series 7, nos. 11-12.

Perrin, Guy 1966 Sociologie de Pareto. Paris: Presses Universitaires de France. → See pages 233-265 for a detailed list of works on Pareto, with comments.

Pirou, GaËtan (1938) 1946 Les théories de l’équilibre économique: Walras et Pareto. 3d ed. Paris: Domat-Montchrestien. → See especially pages 7-26 and 293-460.

Rocca, G.; and Spinedi, V. P. 1924 Bibliografia di Vilfredo Pareto. Rome: Giornale degli Economisti e Rivista di Statistica.

Schumpeter, Joseph A. (1949) 1965 Vilfredo Pareto. Pages 110-142 in Joseph A. Schumpeter, Ten Great Economists, From Marx to Keynes. New York: Oxford Univ. Press.

Secretan, Philippe 1950 Vilfredo Pareto et les problèmes de la société contemporaine. Études sociales no. 2:10-26.

PARETIAN ECONOMIC THEORY

Allais, Maurice (1943) 1952 Traité d’économie pure. 2d ed. Paris: Imprimerie Nationale. → First published in 1943 as Économie pure.

Allais, Maurice 1947 Économie & intérêt: Présentation nouvelle des problèmes fondamentaux relatifs au rôle économique du taux de l’intérêt et de leurs solutions. 2 vols. Paris: Librairie des Publications Officielles.

Allais, Maurice 1953a Le comportement de l’homme rationnel devant le risque: Critique des postulats et axiomes de l’école américaine. Econometrica 21:503-546.

Allais, Maurice 1953b L’extension des théories de l’équilibre économique général et du rendement social au cas du risque. Econometrica 21:269-290.

Allais, Maurice 1960 L’Europe unie: Route de la prospérité. Paris: Calmann-Lévy.

Allais, Maurice 1962 The Influence of the Capital-Output Ratio on Real National Income. Econometrica 30:700-728.

Allais, Maurice 1963 L’influence des besoins sur la production des biens de consommation. Pages 133-194 in Colloque sur l’Évaluation et le Rôle des Besoins de Biens de Consommation dans les Divers Régimes Économiques, Grenoble, 11-15 Sept. 1961, Actes. Paris, Colloques internationaux, Series sciences humaines. Paris: Centre National de la Recherche Scientifique.

Allais, Maurice 1965 The Role of Capital in Economic Development. Pages 697-978 in Study Week on the Econometric Approach to Development Planning, Vatican City, 1963 [Travaux scientifiques et discussions]. Pontificia Accademia delle Scienze, Rome, Scripta varia, Vol. 28. Amsterdam: North-Holland Publishing; Chicago: Rand McNally. → A discussion is on pages 979-1002.

Allais, Maurice 1967 Some Analytical and Practical Aspects of the Theory of Capital. Pages 64-102 in E. Malinvaud and M. O. L. Bacharach (editors), Activity Analysis in the Theory of Growth and Planning. London: Macmillan; New York: St. Martins.

Arrow, Kenneth J. 1951a An Extension of the Basic Theorems of Classical Welfare Economics. Pages 507-532 in Berkeley Symposium on Mathematical Statistics and Probability, Second, 1951, Proceedings. Edited by Jerzy Neyman. Berkeley: Univ. of California Press.

Arrow, Kenneth J. (1951b) 1963 Social Choice and Individual Values. 2d ed. New York: Wiley.

Arrow, Kenneth J. 1953 Rôle des valeurs boursières pour la répartition la meilleure des risques. Pages 41-48 in France, Centre National de la Recherche Scientiflque, Économétric. Paris: The Centre.

Arrow, Kenneth J.; and Hurwicz, Leonid 1958 On the Stability of the Competitive Equilibrium. I. Econometrica 26:522-552.

Arrow, Kenneth J.; Block, Henry D.; and Hurwicz, Leonid 1959 On the Stability of the Competitive Equilibrium. II. Econometrica 27:82-109.

Barone, Enrico (1908) 1935 The Ministry of Production in the Collectivist State. Pages 245-290 in Friedrich A. von Hayek (editor), Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism by N. G. Pierson, Ludwig von Mises, Georg Hahn, and Enrico Barone. London: Routledge. → First published in Volume 37 of Giornale degli economisti.

Bergson, Abram 1938 A Reformulation of Certain Aspects of Welfare Economics, by Abram Burk. Quarterly Journal of Economics 52:310-334.

Bergson, Abram (1948) 1954 Socialist Economics. Volume 1, pages 412-448 in Howard S. Ellis (editor), A Survey of Contemporary Economics. Homewood, III.: Irwin.

Boiteux, Marcel 1951 Le “revenu distribuable” et les pertes économiques. Econometrica 19:112-133.

Boiteux, Marcel 1956 Sur la gestion des monopoles publics astreints à l’équilibre budgétaire. Econometrica 24:22-40.

Boulding, Kenneth E. (1952) 1958 Welfare Economics. Volume 2, pages 1-38 in Bernard F. Haley (editor), A Survey of Contemporary Economics. Homewood, III.: Irwin.

Cowles Commission for Research in Economics 1951 Activity Analysis of Production and Allocation: Proceedings of a Conference. Edited by Tjalling C. Koopmans. New York: Wiley.

Debreu, Gerard 1951 The Coefficient of Resource Utilization. Econometrica 19:273-292.

Debreu, Gerard 1959 Theory of Value: An Axiomatic Analysis of Economic Equilibrium. New York: Wiley.

Desrousseaux, J. 1961 Expansion stable et taux d’intérêt optimal. Annales des mines 150:829-844.

Dorfman, Robert; Samuelson, Paul A.; and Solow, Robert M. 1958 Linear Programming and Economic Analysis. New York: McGraw-Hill.

Edgeworth, Francis Y. (1881) 1953 Mathematical Psychics: An Essay on the Application of Mathematics to the Moral Sciences. New York: Kelley.

Edgeworth, Francis Y. 1896 Supplementary Notes on Statistics. Journal of the Royal Statistical Society 2:533-534.

Frisch, Ragnar 1939 The Dupuit Taxation Theorem. Econometrica 7:145-155.

Haberler, Gottfried (1933) 1936 The Theory of International Trade, With Its Applications to Commercial Policy. London: Hodge. → First published in German.

Hicks, John R. 1939a The Foundations of Welfare Economics. Economic Journal 49:696-712.

Hicks, John R. (1939b) 1946 Value and Capital: An Inquiry Into Some Fundamental Principles of Economic Theory. 2d ed. Oxford: Clarendon.

Hicks, John R. 1941 The Rehabilitation of Consumers’ Surplus. Review of Economic Studies 8, February: 108-116.

Hicks, John R. 1942 Consumers’ Surplus and Index-numbers. Review of Economic Studies 9, no. 2:126—137.

Hicks, John R. 1943 The Four Consumer’s Surpluses. Review of Economic Studies 11, no. 1:31-41.

Hicks, John R. 1946 The Generalised Theory of Consumer’s Surplus. Review of Economic Studies 13, no. 2:68-74.

Hotelling, Harold 1938 The General Welfare in Relation to Problems of Taxation and of Railway and Utility Rates. Econometrica 6:242-269.

Hotelling, Harold 1939 The Relation of Prices to Marginal Costs in an Optimum System. Econometrica 7:151-155.

Kaldor, Nicholas 1939 Welfare Propositions of Economics and Inter-personal Comparisons of Utility. Economic Journal 49:549-552.

Koopmans, Tjalling C. 1957 Three Essays on the State of Economic Science. New York: McGraw-Hill.

Lange, Oskar 1942 The Foundations of Welfare Economics. Econometrica 10:215-228.

Leontief, Wassily W. 1933 The Use of Indifference Curves in the Analysis of Foreign Trade. Quarterly Journal of Economics 47:493-503.

Lerner, Abba P. 1932 The Diagrammatical Representation of Cost Conditions in International Trade. Economica 12:346-356.

Lerner, Abba P. 1944 The Economics of Control: Principles of Welfare Economics. New York: Macmillan.

Little, I. M. D. (1950) 1957 A Critique of Welfare Economics. 2d ed. Oxford: Clarendon.

Malinvaud, Edmond 1953 Capital Accumulation and Efficient Allocation of Resources. Econometrica 2: 233-268.

Malinvaud, Edmond 1959 Programmes d’expansion et taux d’intérôt. Econometrica 27:215-227.

Malinvaud, Edmond 1961 The Analogy Between Atemporal and Intertemporal Theories of Resource Allocation. Review of Economic Studies 28, June: 143-160.

Marschak, Jacob 1950 Rational Behavior, Uncertain Prospects, and Measurable Utility. Econometrica 18: 111-141.

Murray, Robert A. (1911) 1920 Lecons d’économie politique suivant la doctrine de Vecole de Lausanne. Paris: Payot. → First published in Italian.

Myint, Hla 1948 Theories of Welfare Economics. Cambridge, Mass.: Harvard Univ. Press.

Pietri-Tonelli, Alfonso de 1927 Traité d’économie rationnelle. Paris: Giard.

Pigou, Arthur C. (1920) 1960 The Economics of Welfare. 4th ed. London: Macmillan.

Reder, Melvin W. 1947 Studies in the Theory of Welfare Economics. New York: Columbia Univ. Press.

Samuelson, Paul A. 1939 The Gains From International Trade. Canadian Journal of Economics and Political Science 5:195-205.

Samuelson, Paul A. (1947) 1958 Foundations of Economic Analysis. Harvard Economic Studies, Vol. 80. Cambridge, Mass.: Harvard Univ. Press. → A paperback edition was published in 1965 by Atheneum.

Samuelson, Paul A. 1950 Evaluation of Real National Income. Oxford Economic Papers New Series 2:1-29.

Samuelson, Paul A.; and Stolper, Wolfgang F. 1941 Protection and Real Wages. Review of Economic Studies 9:58-73.

Savage, Leonard J. 1954 The Foundations of Statistics. New York: Wiley.

Scitovsky, Tibor 1941 A Note on Welfare Propositions in Economics. Review of Economic Studies 9, November: 77-88.

Scitovsky, Tibor 1942 A Reconsideration of the Theory of Tariffs. Review of Economic Studies 9, no. 2:89-110.

Shackle, G. L. S. (1949) 1952 Expectation in Economics. 2d ed. Cambridge Univ. Press.

Stewart, John Q. 1947 Empirical Mathematical Rules Concerning the Distribution and Equilibrium of Population. Geographical Review 37:461-485.

Von Neumann, John; and Morgenstern, Oskar (1944) 1964 Theory of Games and Economic Behavior. 3d ed. New York: Wiley.

PARETO’S LAW

Davis, Harold T. 1941 The Analysis of Economic Time Series. Bloomington, Ind.: Principia Press.

Frechet, Maurice 1939 Sur les formules de répartition des revenus. Revue de Vlnstitut International de Statistique 7:32-38.

Gibrat, Robert 1931 Les inégalités economiques. Paris: Sirey.

Johnson, Norris O. 1937 The Pareto Law. Review of Economic Statistics 19:20-26.

Mandelbrot, Benoit 1963 New Methods in Statistical Economics. Journal of Political Economy 71:421-440.

II CONTRIBUTIONS TO SOCIOLOGY

Besides being one of the most important founders of mathematical economic theory, Pareto was among the leading theorists of a generation particularly crucial to the development of sociology. Although he enjoyed a short-lived vogue in the United States in the 1930s, it seems fair to suggest that his reputation and influence have not been as great as they intrinsically deserve. While Pareto’s contributions did not equal those of his great contemporaries Durkheim and Weber, he should be ranked very high indeed—perhaps the highest after them—in his generation (Parsons 1937). He stood somewhat outside the main intellectual traditions of his time, particularly those dominant in the most important intellectual centers—English utilitarianism, German idealism and historicism, and French collective “solidarism.” And he was tarred with the brush of fascism—a stigma he deserved, at most, only in part, but a serious one during the Western world’s profound crisis of the 1930s.

The intellectual background of Pareto’s sociological thought lay in two influences. The first was that of physical science and engineering: he received his degree in mechanics and was long a practicing engineer. The second was a Latin-humanistic orientation, by virtue of which he was steeped in the history and literature of both the ancient world and the Renaissance, particularly the latter. He was fluent in both Italian and French, since he had lived as a child in Paris, had moved to Italy when he was ten, and later lived in French Switzerland. Significantly, he had no knowledge of German and relatively little of English. His father was a Mazzinist exile, and politically Pareto was a disillusioned liberal, not a positive fascist.

Social action

Pareto saw the theoretical task of sociology as an extension of that of economics. He defined economics as dealing with one particular type of the components of social action (he used the French word action and its Italian equivalent), those constituting an abstractly conceived system treatable as a set of interdependent variables, on the methodological model of classical mechanics. He then defined sociology residually, as dealing with those components of action, or at least many of them, not handled by economics or by the other disciplines, such as technology, military strategy, etc., which are concerned with what he called logical action (see 1916, vol. 1, especially chapters 1 and 12, which are concerned with defining this position). Focusing on the residually defined components, he attempted to integrate all these elements of action into his grand conception of the equilibrium of the total society as a social system—and of its disturbances.

Pareto’s major point of reference in defining action was in certain respects very similar to that both of Max Weber and of the utilitarians. In comparison with theirs, however, it was more residual and less directly determinate in its statements of problems. Pareto had no equivalent of the sharply defined problem of the status of “ideal factors” that Weber inherited from the idealist-historicist tradition of German thought. Nor did he have the strong presumption of the “randomness of ends” that was so important in the utilitarian tradition and that became Durkheim’s major point of critical purchase. Pareto shared with many of his great predecessors and contemporaries, particularly with the utilitarians, a kind of “Cartesian” background; that is, his essential paradigm for empirical scientific analysis was influenced by Cartesian epistemology. But, as a framework for the analysis of social action, this paradigm involved two major complications. First, the “subject” was conceived by Pareto not only as “knower” but also as actor; second, this actor becomes the object of observation by the social scientist. Thus there are in effect two paradigms—that of the action of observed objects and that of the action of the observer in his relations to these objects—which must be dealt with simultaneously.

Pareto’s approach to this problem was through the concept of logical action, which is essentially the limiting case where the actor is conceived of as a “good scientist,” whose choice of means for ends will, in fact, under specified conditions (with requisite probability), bring about the desired ends. As Pareto put it, the objective and the subjective ends will coincide in this case, so that the “theory” guiding the action can be said to meet the “logicoexperimental” standard. To this he contrasted nonlogical action, i.e., action that deviates from this standard in any way (1916, vol. 1, chapter 2).

He repeatedly warned against the assumption that nonlogical is necessarily illogical. Furthermore, he divided nonlogical action into two basic categories. The first category consists of such action as is determined by factors that are independent of its “subjective” aspects—most definitely, the needs, drives, and instincts of the organism. Had he taken into account the role of such factors alone, Pareto would have been a biophysical reductionist of a type familiar in Western intellectual history of this century. His second category of nonlogical action shows that he was no mere reductionist: it concerns action that is based on normative and cultural factors, insofar as these are not part of the logico-experimental knowledge attributed to the actor; the bases of commitment to the ends or goals of action are included among these factors, as well as the elements of cognitive and expressive culture—especially religious and ideological beliefs, patterns of ritual, and many types of expressive symbolism.

“Theories” of action

Pareto followed a special procedure in going beyond this starting point in his formulations. Instead of subjecting the totality of social behavior to a formal analysis, he confined himself to analyzing the “theories” associated with it. In the case of logical action, he assumed that by definition overt action does in fact correspond to the “theory” behind it. But for nonlogical action, the relationship is directly problematical. Pareto chose to handle the problem pragmatically, treating theories as indices of the forces determining social action, just as, for example, a thermometer reading is an index of the thermal state of the system with which the instrument is linked. Here Pareto’s analysis seems relatively simplistic compared to Durkheim’s elaborate theorizing about the relationship between an actor’s internalized orientations and the “exterior” constraints of his social environment.

With respect to the Cartesian paradigm, Pareto was squarely on the subjective side, in contrast to Durkheim; he analyzed the “orientations” of actors, but not the objects in their situation or the interrelations of actors as situational objects for each other, except insofar as their orientations are objects to the social scientific observer. “Theories” in Pareto’s sense, then, are symbolic systems; in part, at least, they belong to what we would now call the cultural system, although Pareto himself never developed the systematic analytical distinction between social and cultural systems.

Types of nonlogical theories

Beginning with this point of reference, Pareto developed two cross-cutting, interdependent lines of distinction. The first distinction concerns the two ways in which theories can deviate from the standard of logico-experimental science. Theories may be differentiated into those which are “pseudoscientific” and those “which surpass experience” (see 1916; chapter 5 treats the former, chapter 4 the latter). The former are belief systems to which the scientific standard is applicable but which demonstrably fail to meet it. The latter are those to which the scientific standard does not apply, since their propositions can be neither demonstrated nor refuted on the basis of scientific evidence (expérience—meaning empirical and often, though not always, experimental operations).

Since Pareto treated theories (what we would today call belief systems) as indices of the forces “determining social action,” one may assume that he considered the two classes of beliefs to be indices of different categories of forces. This indeed seems to be the case. In a broad, inexact way, the pseudoscientific theories reflect those forces which have been most emphasized by Pareto’s interpreters (Sorokin 1928; Homans & Curtis 1934), namely, needs and instincts at the level of individual psychology, the classical locus of the irrational determinants of behavior as they have been highlighted in the present century. The second class, “theories which surpass experience,” points equally broadly to the cultural dimensions of human action or, in Weber’s terms, to the “problems of meaning” and their grounding in action orientations. These cultural dimensions, in turn, may be related to the vast realm of expressive symbolism in the arts, to the patterns of value orientation that have figured so prominently in the recent work of anthropologists (e.g., Kluckhohn) and sociologists, and, generally, to the normative components in social systems, perhaps especially the legal levels. Pareto, as a good classical humanist, was highly sensitive to the problems of these areas and was seriously concerned with subjecting them to scientific analysis.

Residues and derivations

The second basic line of distinction, that between residues and derivations, has become better known than the distinction between the two ways theories deviate from the standard of logico-experimental science. It is very important, but not very widely noted, that both residues and derivations are components of nonlogical theories, not of concrete behavior. The distinction, then, is simply that between the relatively constant and relatively variable elements that emerge when many such theories are inductively analyzed. Residues are “residual” in the simple sense that they constitute what is left over after the more variable elements have been abstracted from nonlogical theories. In a technical sense, this is the only strictly inductive part of Pareto’s scheme, since he subjected an immense mass of material to an early form of what we would now call content analysis.

The most important connection between this dichotomy and the previous one lies in the fact that the category of residues is especially closely connected—inductively, Pareto would claim—with the category of “theories which surpass experience.” The basis of this connection, Pareto would have it, is that central components of the residues constitute the “major premises” of such belief systems (1916, vol. 1, chapter 9). For instance, one such component comprises the metaphysical assumptions on which the nonlogical, not necessarily illogical, “guides to action” are built. Indeed, contrary to much of the Anglo-American intellectual tradition, Pareto seems not to have been concerned nearly so much with the discrepancies between what people say and what they do as with the variations in the intellectual grounding of what they say, particularly in the relations between the scientific and nonscientific aspects of that grounding. Thus, in his discussion of both magical and religious ritual, he did not treat the problem of whether people in fact follow ritual prescription; he broadly assumed that they do. His problem was to account for the bases on which palpably nonlogical action is considered important and meaningful.

According to Pareto’s analytical method, the first step is to abstract derivations from nonlogical theories. Derivations are the nonlogical devices of “argument” by which conclusions are drawn from the residues as premises. Pareto classified them under four headings—simple assertion, appeal to authority, accord with sentiments, and “verbal proofs,” i.e., direct pseudologic. The idea of derivations has often been compared with Freud’s rationalizations. The main difference is that Pareto was not primarily concerned with the action of particular individuals, as was Freud, but with the currency of derivations as beliefs in a society. The difference of system reference is important.

At the core of the conceptual scheme is Pareto’s cross-tabulation of residues and derivations against the two types of nonlogical theories. His empirical investigations revealed that in the resulting fourfold table, attributes are not distributed randomly, that in fact there are two crowded cells: there is a strong correlation (which Pareto never expressed numerically) between “theories which surpass experience” and residues, on the one hand, and “pseudoscientific theories” and derivations, on the other. As a good empiricist, Pareto was careful not to close off any perspectives that might lend importance to the other two cells. Nevertheless, he claimed that derivations are more closely linked with pseudoscience than with theories “surpassing experience” and that residues are related to the cultural dimension of human action.

Society as a system

Pareto’s intention in working with this crucial cross-classification was to develop a set of categories for delineating a social system—pre-eminently a total society—as a system and for understanding its processes. Indeed, as Henderson held, it may well be that Pareto’s greatest contribution to sociology is his use of the system concept (Henderson 1935). Pareto derived this concept from analytical mechanics and, before using it in sociology, applied it elaborately and, on the whole, successfully to economics. The concept of equilibrium is central to this kind of system analysis, and therefore Pareto has often been misunderstood as holding to a “static” conception of social phenomena. Actually, he was very careful to protect himself on this point by distinguishing between static, dynamic, and “moving” equilibria, and by allowing explicitly for structural change ([1916] 1963, vol. 4, chapter 12, pp. 1433-1456). It is of course true that he used a natural science model and not, for instance, a “dialectic” one. However, the relevant critical comment is not that he misused the concepts of system and equilibrium but that his scheme can be substantially improved with newer theoretical resources. These include both more refined formulations of the social subject matter itself and more detailed general scientific conceptions of systems, such as homeostasis (as developed in physiology), and, more recently, cybernetic control.

Ophelimity and utility. Pareto’s most general and most notable statement about the interrelations of logical and nonlogical action and about their relations to the social system is to be found in his discussion of the theory of social utility. He began with the conception generally known in economics as the “doctrine of maximum satisfaction.” Coining the term ophelimity to designate the economic aspect of satisfaction, as distinguished from the broader sociological aspect for which he reserved the term utility, Pareto stated the fundamental proposition that ophelimity can be treated only distributively, as an aggregate of the satisfactions of individual actors in the system. Then he distinguished two types of change in an economy—one that affects all actors in the same direction and one that improves the economic situations of some while it injures those of others. Only the first type of change can be justified on economic grounds that are also scientific. Here Pareto presented the most important early formulation of the conception of the limitations of welfare economics (see [1916] 1963, vol. 4, chapter 12, pp. 1457-1500). Unfortunately, most economists (cf. Arrow 1951; Boulding 1956) have not followed Pareto’s example. They have accepted his view that ophelimity, as he called it, is a concept which assumes the incomparability of wants as between individuals, but they have not followed up his further view that utility (in Pareto’s sense) is a basis of establishing such comparability on two levels—that of distributive problems and that of the “welfare” of the system as a whole.

Welfare for and of the collectivity. Pareto referred to ophelimity as being for the collectivity, maintaining that a scientific judgment of the welfare of the collectivity or system (i.e., its welfare as a unity) has no meaning in economic terms. In “social” terms, however, he asserted that utility—as distinguished from ophelimity—is both for and of the collectivity. Both require, as we would now say, bases of integration which transcend the level of the economic interests of units. Pareto’s discussion of utility in the distributive sense touches essentially the same considerations as Durkheim’s treatment of the emergence of organic solidarity through the institution of contract. The second sense he attributed to utility concerns the society’s treatment as a total unit and hence the status of system members from the viewpoint of their contributions to the collective whole. In these formulations, Pareto sharply emphasized both the importance of problems of integration at societal levels, in terms of values as well as norms, and the fact that economics can never be a general science of society precisely because it cannot deal with such problems. In these respects Pareto converged most significantly with his great contemporaries Durkheim and Weber in clarifying the main focus of theoretical concern for sociology.

The “foxes” and the “lions.”

The core of Pareto’s theoretical interest—and the vital part of his contribution—was to develop the concept of “theories which surpass experience” and to relate them to residues rather than to the noncultural (particularly psychological) factors impinging on social organization.

His long discussion of the place of residues, derivations, and their interdependent relationships with other elements of action in the equilibrium of the social system was an effort to delineate this special interest. Here, for purposes of detailed discussion, Pareto confined himself to two of his six classes of residues—the “instinct of combinations” and the “persistence of aggregates.” Very broadly, the first consists of the commitments or propensities in social groups to adapt flexibly to environmental or situational exigencies, while the second consists of the proclivity in social groups to maintain patterns of commitment once they have become institutionalized. The latter is something like what the present author has called the “pattern-maintenance” component of societies.

Pareto made one of his most important empirical generalizations by combining this analytical distinction with a conception of the elite element in social stratification systems. He confined himself to the simplest level of analysis of such systems, distinguishing only between elite groups, which combine control of great political power with the enjoyment of high prestige in various other respects, and the other groups which constitute the mass of the society and which have relatively little power, prestige, or wealth. He then developed the idea that the composition of the elites alternates cyclically—i.e., there is a “circulation of elites” between those elements in a society more actuated by the “combinations” residues, or the “foxes,” and those more actuated by the “persistence” residues, or the “lions” ([1916] 1963, vol. 1, chapters 12 and 13). Pareto showed that, in a political context, the lions’ commitment to belief systems and values is connected with a readiness to resort to force, while the foxes’ flexibility and adaptability mean that they are apt to have insufficient concern with the conditions of the stability of the political system in which they operate. During the Reformation, according to Pareto, the predominance of lions in the elite reached a high point, as witness the wars of religion. On the other hand, in the late nineteenth century in democratic countries, the foxes tended to predominate in a way which contributed to the growing instability of that period.

Circulation of elites

Pareto’s analysis of the circulation of elites led to a set of empirical generalizations. In modern terms, it is an analysis of an important rhythm in the processes of change in dynamic societies (like that of the West, both ancient and modern), consisting of successive phases in which leadership is primarily in the hands of adaptive-innovative and then of conservative-regressive groups.

Pareto’s writings in this area bear reconsideration in the light of the many developments of social science since those early years of the present century when his ideas took shape. Those who object to his political tendencies—who have dubbed him an “elitist”—tend to take exception to this aspect of his work above all, as well as to criticize his acceptance of election to the Italian Senate early in the Mussolini regime. Politically, he certainly deserves this disapproval and, to a certain extent, the label: he had indeed become highly skeptical of democratic idealism, particularly the kind that often borders on utopianism. But on the strictly scientific level, his theoretical procedures were conservative in a positive sense. He used very simple, unexceptionable analytical distinctions and attempted to proceed step by step from these to inductively based generalizations—mobilizing massive historical evidence at each step.

Assessment

Because of his time and his intellectual milieu, Pareto did not use the newer techniques of empirical research that have become so important for sociology; even his use of statistics was probably not as advanced as Durkheim’s, and he conducted no specific empirical study comparable to Suicide. (He was, however, an accomplished mathematician.) His important achievement for sociology was his modern, technical approach to the problem of general theory, an approach that was at once substantive and procedural, and, of course, the formulation of a long series of stimulating empirical generalizations.

Insofar as the substantive aspect of his theory is concerned, it is now apparent, to be sure, that his constant use of the residual method limited the usefulness of his more specific theoretic formulations. This is to say that important as his use of the concept of social system was, Pareto had only pragmatic criteria to define the boundaries of such a system in a theoretical sense; he had to “feel out” relations of interdependence. At the present stage of the development of sociological theory it has become possible to formulate a complete set of conceptual components of such a system—of course, the formulations are subject to continual revision—so that the points to look at for important “feedback” relationships are defined in advance. Nevertheless, Pareto’s formulations did highlight strategic points for sociological analysis, and it would be rewarding to give them a systematic critical review in the light of subsequent developments. It may prove possible to reintroduce into sociological theory some of Pareto’s specific analyses of the various areas he treated residually. A pre-eminent candidate for serious reconsideration is his theory of social utility.

Perhaps, however, Pareto’s most important contribution was, in a broad sense, procedural rather than substantive. His conception of scientific procedure is based on his conviction of the central importance to science of the concept of system. From this point of departure he attempted to proceed systematically: from the conception of the system in analytical mechanics, through that of system in economics, eventually to that of a total social system. His procedure follows the best traditions of theory construction and, with all its substantive limitations, can serve as an important model today. Most of the neglect of Pareto stems from the scientific limitations of subsequent generations of sociologists rather than from his irrelevance to their interests.

Talcott Parsons

[For the historical context of Pareto’s contributions to sociology, seeSociology, article onthe development of sociological thought; and the biographies ofDescartes; Durkheim; Weber, Max; for discussion of the subsequent development of his ideas, seeSystemsanalysis, article onSocial Systems.]

works by pareto

(1896-1897) 1964 Cours d’économie politique. New ed. Oeuvres completes, Vol. 1. Geneva: Droz. → See especially the “Introduction” by Georges H. Bousquet and the “Bibliographical Note” by Giovanni Busino. The first edition was published in two volumes.

(1902-1903) 1965 Les systèmes socialistes. 3d ed. Oeuvres completes, Vol. 5. Geneva: Droz.

(1916) 1963 The Mind and Society: A Treatise on General Sociology. 4 vols. New York: Dover. → First published as Trattato di sociologia generale. Volume 1: Non-logical Conduct. Volume 2: Theory of Residues. Volume 3: Theory of Derivations. Volume 4: The General Form of Society.

supplementary bibliography

Arrow, Kenneth J. 1951 An Extension of the Basic Theorems of Classical Welfare Economics. Pages 507-532 in Berkeley Symposium on Mathematical Statistics and Probability, Second, 1951, Proceedings. Edited by Jerzy Neyman. Berkeley: Univ. of California Press.

Bobbio, Norberto 1964 Introduzione. In Vilfredo Pareto, Trattato di sociologia generale. 2d ed. Milan: Edizioni di Comunità.

Borkenau, Franz 1936 Pareto. New York: Wiley; London: Chapman.

Boulding, Kenneth E. 1956 The Image: Knowledge in Life and Society. Ann Arbor: Univ. of Michigan Press.

Bousquet, Georges H. 1928 The Work of Vilfredo Pareto. Minneapolis, Minn.: Sociological Press.

Bousquet, Georges H. 1960 Pareto (1848-1923); Le. savant et l’homme. Études et documents pour servir à l’histoire de l’Université de Lausanne, Vol. 7. Lausanne (Switzerland): Payot. → See page 200 for a bibliography of works on Pareto.

Henderson, L. J. 1935 Pareto’s General Sociology: A Physiologist’s Interpretation. Cambridge, Mass.: Harvard Univ. Press.

Homans, George C ; and Curtis, Charles P. Jr. 1934 An Introduction to Pareto: His Sociology. New York: Knopf.

Parsons, Talcott (1937)1949 The Structure of Social Action: A Study in Social Theory With Special Reference to a Group of Recent European Writers. Glencoe, III.: Free Press.

Sorokin, Pitirim A. 1928 Contemporary Sociological Theories. New York: Harper. → A paperback edition was published in 1964 as Contemporary Sociological Theories Through the First Quarter of the Twentieth Century.

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Pareto, Vilfredo

PARETO, VILFREDO

(b. Paris, France, 15 July 1848; d. Céligny, Switzerland, 19 August 1923), economics, sociology.

Pareto, economist and sociologist, contributed to the development of general equilibrium theory and defined the criterium of optimality known as Pareto optimum. He studied income distribution defining the Pareto’s law of distribution and advanced the application of statistical methods in the social sciences. In sociology he underlined the distinction of logical and non logical actions and proposed a dynamic theory of the circulation of elites.

Life Vilfredo Pareto, the son of a marquis, Raffaele Pareto, graduated in mathematics and engineering from the Polytechnic University of Turin in Italy. Beginning in 1875, he was technical director of an iron and steel company, based in the Tuscany region and subsequently was the company’s general manager. In contact with the cultural elite of Florence, Tuscany’s main city, he cultivated history, sociology, and the classics and was a militant upholder of free trade. He twice stood, unsuccessfully, as a candidate in the legislative elections of the young Kingdom of Italy. In the late 1880s and early 1890s, Pareto wrote articles opposing policies of protectionism and militarism in Italy. His intransigent criticism of the Italian government had some international resonance. Meanwhile, the financial situation of the Italian Ironworks Company, of which he was director general, seriously deteriorated, and Pareto finally had to resign in 1890. He broke away from active politics and business to turn to scholarship but continued participating in sharp political and economic controversies. The Italian economist Maffeo Pantaleoni recommended him as a possible successor to the French economist Léon Walras, who held the chair of political economy at the University of Lausanne in Switzerland. Pareto was eventually appointed in 1893 after having become personally acquainted with Walras, whose general equilibrium approach Pareto appreciated while scoffing at his utopian visions of social justice.

Pareto taught economics and sociology at the University of Lausanne until his retirement in 1911. Having inherited a fortune in 1899, he bought a villa at Céligny, on Lake Geneva in Switzerland. After his marriage broke down in 1901, Pareto lived at Céligny with a much younger companion, Jeanne Regis, whom he married just two months before his death in 1923. In his maturity, Pareto departed entirely from the liberal and pacifist creed of his youth. During Europe’s post–World War I crisis, he heralded the downfall of the parliamentary system. In Italy, he was initially diffident toward the fascist movement, but he then approved of Benito Mussolini’s rise to power in 1922 and placed his trust in the emerging authoritarian regime, although fearing despotism and the suppression of free speech. At the end of his life, in some notes on the constitutional reform, he recommended the shift of power into the hands of a strong governing elite and some executive committees, but maintaining the parliament and free press. In 1923 Pareto accepted quite reluctantly the honor of being named senator by Mussolini’s government, but he eventually refused to submit the required documents to validate the act.

Economic Equilibrium and Optimal Allocations Pareto published his first theoretical contributions to economics in 1892, having read Walras and the leading economists in the so-called marginalist revolution. In the essay “ConsideRāzīoni sui principi fondamentali dell’economia politica pura” (1892–1893; Considerations on the fundamental principles of pure political economy), he studied consumer equilibrium and made a resolute defense of the theory of relative prices based on marginal utility. He still assumed cardinally measurable utility functions and tried to prove rigorously that the demand curve for each good is negatively sloped with respect to price.

In his first treatise, the Cours d’économie politique(2 vols., 1896–1897; A course in political economy), Pareto aimed at applying the “experimental method,” according to the principle of “successive approximations,” in the scientific study of economic and social phenomena. He meant “to offer an outline of economic science considered as a natural science and founded solely on facts” (Pareto 1896–1897 [1964, p. iii]). Scientists have to single out broad uniformities of phenomena, based on empirical evidence, to identify scientific laws. To move on from theory to the analysis of each concrete phenomenon, scientists

must take into account, through successive approximations, the richer interdependences disregarded in pure theory. According to the principle of successive approximations, economic science, which Pareto called the science of ophelimity, is the abstract theory, in mathematical language, of the ideal conditions of exchange by optimizing agents. Pareto stressed that the utility dealt with in pure economics (ophelimity) has the sole function of expressing the subjective preferences of the economic agent, whom he identified with the fictitious “homo oeconomicus.”

Together with Irving Fisher and Philip Wicksteed, Pareto championed the interpretation of market equilibrium theory as a theory of compatible optimal choices based on the ranking of individual preferences. In his second treatise, the Manuale di economia politica(1906), he criticized the notion of cardinal utility and the hazy philosophical background underlying ideas of measurable utility in economics. He suggested the plotting of consumers’ subjective preferences solely with indifference curves and argued that, given indifference curves, it was possible to index each consumer’s preferences with infinite utility functions. In the crude language of mechanical analogies that he extensively adopted, Pareto accounted for choices as paths along which economic agents move like material points, drawn on by forces of attraction (tastes) or constrained by obstacles (technology and resource constraints). Pareto built his economic theory on the frame of Walras’s general equilibrium model. He offered an updated version of economic equilibrium equations in the extended mathematical appendix added to the French edition of his Manuale di economia politica(Manuel d’économie politique, 1909) and in the entry “Economie mathématique” (Mathematical economics) for the Encyclopédie des Sciences Mathématiques (1911). Pareto differentiated “statics,” or the study of isolated equilibria from the “dynamics of successive equilibria,” the sequence of equilibria over time, and he considered long-term trends and cyclical fluctuations. He conjectured that, in principle, equilibrium prices and quantities might be calculated if all the data and parameters could be known in advance; he emphasized, however, the extraordinary complexity of the problem, concluding that actual computation of equilibrium would remain a mirage.

Pareto was far from consistent in the ordinalist approach, and the inconsistencies were pointed out in later economic literature. Pareto did not totally reject the assessment of social utility, which he identified with the rational evaluation of social well-being, a difficult task because of its dependence on the cultural context and the modest scientific scope it offered. To deal with a well-defined notion of social optimum, “the greatest possible welfare to the individuals of the collectivity,” he introduced the principle later associated with his name in the term Pareto optimality or Pareto efficiency. An optimum allocation of resources is reached, it stated, if the allocation is feasible and no individual agent’s well-being may be improved except by reducing the well-being reached by some other agent. Pareto defined “the position of maximum ophelimity” to be an allocation from which it is impossible to move—given the available resources—in such a way that the ophelimities of the agents, except for some which remain constant, all increase. The principle made it possible to clearly single out suboptimal allocations, where at least one agent could improve its well-being with none of the other agents being worse off.

Given certain rules of distribution, we can seek the position which gives, always in conformance with these rules, the greatest possible welfare to the individuals of the collectivity. Consider any position, and assume that we move away from it by a very small amount, consistent with the restrictions. If in so doing the welfare of all the individuals of the collectivity is increased, it is obvious that the new position is more advantageous to each one of them; and vice versa, it is less so if the welfare of all the individuals is decreased. Moreover, the welfare of some of them can remain the same, without changing these conclusions. But on the other hand, if this small movement increases the welfare of certain individuals and decreases that of others, we can no longer state positively that it is advantageous to the entire collectivity to carry out that movement. (Pareto, 1909 [1971, p. 451])

Optimal allocations are contingent on the initial distribution of wealth, and Pareto argued that pure economics did not offer criteria that might prove decisive in the choice between a system based on private property and a socialist system. Although a collectivist state could achieve, in principle, the same productive efficiency as a free market economy and obtain the maximum ophelimity for the economic agents—according to some chosen distributive criteria—by appropriate transfers, the computation of the optimum solution would be impracticable. Moreover, state employees would prove less efficient than the entrepreneurs of a market economy because of the former’s lack of incentives.

According to his vision of scientific research, which was modeled on physics, Pareto looked at empirical verification as the ultimate criterion of truth. He contributed to the development of econometrics and applied economics, employing time series techniques for the analysis of economic and social data (income distribution, demography, wages, exchange rates) and investigating the best interpolation methods (especially Cauchy’s method and least squares). Beginning in his early years in Lausanne, he studied the distribution of incomes on available statistical evidence. Pareto identified a remarkably stable pattern of income distribution, expressed by an equation known in later literature as Pareto’s law or Pareto’s distribution. The unequal income distribution that Pareto held to be quite invariant throughout history was to form the basis of his theory of the circulation of elites or “aristocracies”—social groups in a dominant position that succeed one upon another in the course of history.

Later Ideas: Nonlogical Actions The early years of the new century saw Pareto abandoning the ideology of his youth to stress the role that primary impulses and deceptive ideologies play in human history. In Les systèmes socialistes (2 vols., 1902–1903), he critically examined both collectivist organization and socialist ideas from antiquity to his own time. He explained the powerful appeal of socialist ideologies with the theory of elites, or the alternation in power, amidst social and political conflict, of emerging and declining aristocracies. Pareto saw the socialist ideologies as offering a rational semblance to the urge driving new social groups to assert themselves as an emerging aristocracy. In Les systèmes socialistes, he moved away from liberal ideals to study, with professed scientific detachment, the power struggle concealed in the clash of ideologies.

In Pareto’s sociological thought, nonlogical actions play a central role. Pareto classified as nonlogical an array of human actions, from simply stupid or purely conventional behavior up to the higher forms of symbolic thinking. In his sociology he argued that although humans most often act to achieve a subjective end—namely, the conscious aim that frames the action—it may prove to be totally different from the objective end, the real effect that the action achieves.

In his Trattato di sociologia generale(2nd ed., 3 vols., 1923; The Mind and Society: A Treatise on General Sociology, 4 vols., 1963), Pareto dealt primarily with human action in history and nonlogical actions, already explored in the Manuale di economia politica, as the main focus of his studies. Logical actions are only those that logically connect means and ends, being directed to a conscious finality and being inspired by a correct perception of the relevant causal nexuses. Nonlogical actions are either those not moved by a conscious finality (such as instinctual behavior or settled habits) or those that are aimed at an end that does not correspond to the effects produced. Logical actions have vast scope in society (as in rational scientific enquiry), but nonlogical actions play a predominant part. According to Pareto, men tend to give a logical veneer to their behavior, justifying it with deceptive motivations. At the source of all human action are universal primary impulses; Pareto named the sentiments and beliefs that arise from such primary impulses residues and classified them into basic types. Humans act under the drive of the residues and under the cover of false rationalizations—that self-deception which Pareto termed derivations. The derivations are the complex web of fictitious rational motivations that both express and conceal the basic sentiments and beliefs at the root of acting. In Pareto’s sociology, the sphere of rationalized feelings (such as myth, religion, ethics, and ideology) is essential for social life and historical evolution. Misconceived emotional motives, concealed under the disguise of religion, myth, or ideologies, bind together people in sociality and drive them to act, forging the history of nations through the alternation of aristocracies.

Turning to Political Science In his sociology, Pareto had extensively dealt with political power in societies. From 1920 onward he devoted more and more papers to political developments, commenting on contemporary events in Italy or in the international scene. In the book Trasformazione della democRāzīa (1921; The Transformation of Democracy, 1984), he evoked the crisis of the parliamentary democracies, the parliaments’ loss of effective sovereignty, the progressive predominance of coalitions of interests suffocating free competition, and the escalating antagonism on the international scene. Democracy, he held, was an unstable system, and he regarded the democracies of his time as being undermined by irreversible crisis. Pareto analyzed the European conflict as generated by a clash between peoples—Germans, Slavs, and Britons— lusting for supremacy and germinating from conflict between the aristocratic and military bureaucracies of Germany and Austria, on one side, and the “demagogic plutocracy” prevailing in most countries among the Entente Powers, especially in Great Britain, France, and the United States. The cure Pareto prescribed for the ailing state of Europe’s political system after the Great War was not a reform of institutions to consolidate the democracies, but rather the emergence of an authoritarian state to guarantee the survival of a much-enfeebled parliamentary democracy. Pareto, never a militant fascist and until the end of his life an independent thinker, contributed to the decline of liberal culture in crucial years of European history, in the aftermath of World War I.

BIBLIOGRAPHY

WORKS BY PARETO

“ConsideRāzīoni sui principi fondamentali dell’economia politica pura.” Giornale degli Economisti May 1892: 389–420; June 1892: 485–512; August 1892: 119–157; January 1893: 1–37; October 1893: 279–321. Reprinted in Oeuvres complètes de Vilfredo Pareto, edited by Giovanni Busino. Vol. 26, Ecrits d’économie politique pure. Geneva, Switzerland: Librairie Droz, 1982.

La courbe de la répartition de la richesse. Lausanne, Switzerland: Charles Viret-Genton, 1896. Reprinted in Oeuvres complètes de Vilfredo Pareto, edited by Giovanni Busino. Vol. 3, Écrits sur la courbe de la répartition de la richesse. Geneva, Switzerland: Librairie Droz, 1965.

Cours d’économie politique professé à l’Université de Lausanne. 2 vols. Lausanne, Switzerland: F. Rouge, 1896–1897. Reprinted in Oeuvres complètes de Vilfredo Pareto, edited by Giovanni Busino. Vol. 1, Cours d’économie politique. Geneva, Switzerland: Librairie Droz, 1964.

Les systèmes socialistes. 2 vols. Paris: V. Giard & E. Brière, 1902–1903. Reprinted in Oeuvres complètes de Vilfredo Pareto, edited by Giovanni Busino. Vol. 5, Les systèmes socialistes. Geneva, Switzerland: Librairie Droz, 1978.

Manuale di economia politica. Milan, Italy: Società Editrice Libraria, 1906. Translated by Alfred Bonnet as Manuel d’économie politique, Paris: V. Giard & E. Brière 1909. Reprinted in Oeuvres complètes de Vilfredo Pareto, edited by Giovanni Busino. Vol. 7, Manuel d’économie politique. Geneva, Switzerland: Librairie Droz, 1981. Translated by Ann S. Schwier as Manual of Political Economy, edited by Ann S. Schwier and Alfred N. Page. New York: A. M. Kelley, 1971.

“Economie mathématique.” In Encyclopédie des Sciences Mathématiques Pures et Appliquées, Publié sous les Auspices des Académies des Sciences de Gottingue, de Leipzig, de Munich et de Vienne avec la collaboration de nombreux savants. Paris: Gauthiers-Villar, Tome 1, Vol. IV, issue 4, edited by Jules Monk, 1911. Reprinted in Oeuvres complètes de Vilfredo Pareto, edited by Giovanni Busino. Vol. 8, Statistique économie et mathématique. Geneva, Switzerland: Librairie Droz, 1966.

Trattato di sociologia generale. 2nd ed. 3 vols. Florence, Italy: G. Barbera, 1923. Translated by Pierre Boven and revised by the author as Traité de sociologie génerale (2 vols., Lausanne, Switzerland; Paris: Payot, 1917–1919). Reprinted in Oeuvres complètes de Vilfredo Pareto, edited by Giovanni Busino. Vol. 12, Traité de sociologie générale. Geneva, Switzerland: Librairie Droz, 1968. Translated by Andrew Bongiorno and Arthur Livingston, with the advice and active cooperation of James Harvey Rogers, as The Mind and Society: A Treatise on General Sociology, edited by Arthur Livingston. 4 vols. New York: Dover, 1963.

Fatti e teorie. Florence, Italy: Vallecchi, 1920. Reprinted in Oeuvres complètes de Vilfredo Pareto, edited by Giovanni Busino. Vol. 21, Faits et théories, translated by Micheline Tripet. Geneva, Switzerland: Librairie Droz, 1976. Trasformazione della democRāzīa. Milan, Italy: Corbaccio, 1921. Reprinted in Oeuvres complètes de Vilfredo Pareto, edited by Giovanni Busino. Vol. 13, La transformation de la démocratie, translated by Corinne Beutler-Real. Geneva, Switzerland: Librairie Droz, 1970. Translated by Renata Girola as The Transformation of Democracy, edited by Charles H. Powers. New Brunswick, NJ: Transaction Books, 1984.

Oeuvres complètes de Vilfredo Pareto. Edited by Giovanni Busino. 32 vols. Geneva, Switzerland: Librairie Droz, 1964–2005.

OTHER WORKS

Aron, Raymond. “Le machiavélisme, doctrine des tyrannies modernes.” In L’homme contre les tyrans, by Raymond Aron. 4th ed. Paris: Gallimard, 1946. Reprinted in Chroniques de guerre: La France libre, 1940–1945, by Raymond Aron. Paris: Gallimard, 1990.

Blaug, Mark, ed. Vilfredo Pareto (1848–1923). Pioneers in Economics series 35. Brookfield, VT; Aldershot, U.K.: Edward Elgar, 2002.

Bruni, Luigino. Vilfredo Pareto and the Birth of Modern Microeconomics. Northampton, MA; Cheltenham, U.K.: Edward Elgar, 2002.

Chipman, J. S. “The Paretian Heritage.” Revue Européenne des sciences sociales 14, no. 37 (1976): 65–171.

Kirman, Alan. “Pareto as an Economist.” In The New Palgrave: A Dictionary of Economics, edited by John Eatwell, Murray Milgate and Peter Newman. Vol. 4. London: Macmillan, 1987.

McLure, Michael. Pareto, Economics and Society: The Mechanical Analogy. London; New York: Routledge, 2001.

——, and John Cunningham Wood. Vilfredo Pareto: Critical Assessments of Leading Economists. 4 vols. London: Routledge, 1999.

Schumpeter, Joseph A. “Vilfredo Pareto. 1848–1923.” Quarterly Journal of Economics 63, no. 2 (May 1949): 147–173. Reprinted in Ten Great Economists, from Marx to Keynes, by Joseph A. Schumpeter. New York: Oxford University Press, 1951.

Weber, Christian E. “Pareto and the 53 Percent Ordinal Theory of Utility.” History of Political Economy 33 (2001): 541–576.

Bruna Ingrao

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Vilfredo Pareto

Vilfredo Pareto

The Italian sociologist, political theorist, and economist Vilfredo Pareto (1848-1923) is chiefly known for his influential theory of ruling elites and for his equally influential theory that political behavior is essentially irrational.

Vilfredo Pareto was born in Paris on July 15, 1848. His father, an aristocratic Genoese, had gone into political exile in France about 1835 because he supported the Mazzinian republican movement. He returned to Piedmont in 1855, where he worked as a civil engineer for the government. Vilfredo followed his father's profession after graduating from the Polytechnic Institute at Turin in 1869. He worked as director of the Rome Railway Company until 1874, when he secured an appointment as managing director of an iron-producing company with offices in Florence.

In 1889 Pareto married a Russian girl, Dina Bakunin, resigned his post with the iron company for a consultancy, and for the next 3 years wrote and spoke against the protectionist policy of the Italian government domestically and its military policies abroad. His reputation as a rebellious activist led to an intimate acquaintance with the economist Maffeo Pantaleoni. This association led to Pareto's interest in pure economics, a field in which he quickly became proficient and well known. His reputation gained him an appointment in 1893 to the prestigious post of professor of political economy at Lausanne University.

In 1894 Pareto published his first noted work, Cours d'économie politique, which evoked a great deal of commentary from other economists. Two years later he inherited a small fortune from an uncle, a windfall which caused him to think of retiring to pursue research. At this point he began to develop the theories for which he is most famous, elitism and irrationalism in politics.

In his own earlier political career Pareto had been an ardent activist in behalf of democracy and free trade, as had been his father before him. The reasons for the marked change in his political outlook have been much disputed, ranging from the Neo-Freudian analytical account, to the interpretation which stresses certain developments in his own career, to the explanation which maintains that, quite simply, he changed because of the results of his own vast studies. By the time his next book, The Manual of Political Economy, was published in 1906, his ideas on elites and irrationalism were already well developed. The following year he resigned from his chair of political economy at Lausanne to devote all his energies to researching his theories.

Pareto retired to his villa at Celigny, where he lived a solitary existence except for his 18 Angora cats (the villa was named "Villa Angora") and his friend Jane Régis, a woman 30 years younger than he who had joined his household in 1901, when his wife left him. In 1907 he began writing his most famous and quite influential work, The Treatise on Sociology; he completed it in 1912 and published it in 1916. (The work was published in English translation as The Mind and Society in 1935 in a four-volume edition.) In 1923 he secured a divorce from his wife and married Jane Régis. Later the same year he died.

Pareto's theory of elitism is sometimes simplistically explained on the basis of his aristocratic heritage. However, as recent scholarship has shown, throughout his life and in his published works he often expressed extreme distaste with the titled Italian aristocracy, just as he was anti-socialist, anti-government-interventionist, anti-colonialist, anti-militarist, anti-racialist, and "anti-anti-Semitic." Attracted to fascism when it first came to power in Italy, he later opposed it. He is perhaps best described as an iconoclastic individualist.

The Mind and Society is at one and the same time a debunking of Marxism and of the bourgeois state. Pareto's method of investigation is inductive or positivistic, contemptuously rejecting natural law, metaphysics, and deductive reasoning. On the basis of very extensive historical and empirical studies, Pareto maintained that in reality and inevitably the true form of government in any state is never a monarchy, hereditary aristocracy, or democracy but that always all social organizations, including states, are governed by a ruling elite. This ruling elite, which has greater vitality and usefulness than other elites, dominates them until it in turn is overturned by a more powerful elite—Pareto's theory of "the circulation of elites." Political behavior itself, both of the masses and of the elites, is basically emotional and nonrational. The function of reason is to justify past behavior or to show the way to future goals, which are determined not by reason but by emotional wants.

Further Reading

Elitism is today, in one variety or another, the leading approach to the analysis of empirical political behavior by political scientists. Consequently, the literature on the subject, and on Pareto, is enormous. A good general introduction is James Burnham, The Machiavellians: Defenders of Freedom (1943). Pareto's name is almost always coupled with Gaetano Mosca's. For an approach which stresses the difference, even antagonism, between the two, see the introduction to James H. Meisel, ed., Pareto and Mosca (1965); the first nine essays in this work discuss various aspects of Pareto's life and work. See also George C. Homans and Charles P. Curtis, An Introduction to Pareto (1934), and Franz Borkenau, Pareto (1936).

Additional Sources

Powers, Charles H., Vilfredo Pareto, Newbury Park, Calif.: Sage Publications, 1987.

Vilfredo Pareto, (1848-1923), Aldershot, Hants, England; Brookfield, Vt., USA: E. Elgar Pub., 1992. □

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Pareto, Vilfredo

Pareto, Vilfredo 1848-1923

BIBLIOGRAPHY

Vilfredo Pareto was born in Paris on July 15, 1848, the son of Raffaele (a marquis originally from Genoa, republican political exile, and hydraulic engineer) and Marie Metenier, the daughter of a winegrower from Moulins, a small city in the department of Allier in central France. Vilfredo was therefore perfectly Italian-French bilingual. He could also read English but did not know any other modern language, although he had a good knowledge of ancient Greek and Latin (and their respective cultures).

He studied in Turin, where in 1867 he obtained a degree in mathematics, and in 1870 a degree in engineering. From his university studies he derived not only an up-to-date mathematical and technological preparation but also his scientific method: the logical-experimental method. It is likely that he acquired this method from Dutch physiologist Jakob Moleschott (who in that period was teaching at the University of Turin), and then refined it by studying John Stuart Mills System of Logic in its French edition (1866).

Pareto thought that the explanation (that is, the theoretical reproduction) of reality can never be perfect but can always be improved by drawing the hypotheses of the theory from the observation of reality, by developing them with the help of mathematics, and by obtaining in this way some propositions that must then be compared with reality (through statistics and history). From the discrepancies that one inevitably finds, one can deduce some refinements for the starting hypotheses, and so on.

From 1873 until 1890, Pareto managed one of the first Italian ironworks, situated in San Giovanni Valdarno near Florence. After resigning in 1890 because of differences with the owners, he devoted himself to journalism as a vehicle for his views in favor of pacifism and free trade.

Through Maffeo Pantaleoni and above all Léon Walras, he became interested in mathematical economics, which he initially intended to use to provide economic liberalism with new theoretical foundations. Pareto was offered the chair of political economics at the University of Lausanne, where he replaced Walras, who had resigned for health reasons. There he taught, albeit with increasing irregularity, from May 12, 1893, to June 9, 1909. From Walras he only took the concept of General Economic Equilibrium (GEE) because of its methodological property of encompassing the whole of economic phenomena. He developed it by applying it to reality and above all by giving it a new foundation in the theory of choice, which seemed to him more compatible with his methodology than the theory of utility, a concept that could not be easily measured and was therefore unbearably metaphysical.

In the same framework Pareto places his well-known definition of economic optimum as an allocation of resources such that if, as one moves away from it, the ophelimity, or economic satisfaction, of at least one individual increases and the ophelimity of at least one other individual decreases. The sources of this definition are Walrass demonstration of the optimality of free competition and some criticisms by Pantaleoni and Enrico Barone about a first tentative Paretos treatment of the subject.

The failure of European economic liberalism at the end of the nineteenth century did nevertheless reinforce his idea that economic theory was unable to explain the whole of social reality. Many more concepts were required for that, and Pareto took them from sociology. In this way he integrated GEE in a general social equilibrium whose main elements, alongside interests, are: passions (which he called residues); the diversity of human beings, which generates the division of every society into a majority of dominated people and a minority of dominating people, that is, the elite, with the elites following one another in power in rather rapid succession; and derivations (that is, the pseudological motivations that human beings give for actionsand they are the majority of all actionsthat are in fact only inspired by passions). The main criticisms of Pareto regard the static nature of his systems of general (economic and sociological) equilibrium, and his idea that human nature cannot be modified. In the last months of his life Pareto sympathized with fascism, as many Italian liberals did at the time, since in it he saw the timely restorer of Italian public order, which had been disrupted by the local supporters of bolshevism. On the other hand, he noticed and condemned the first authoritarian trends of Mussolinis regime.

Pareto died in Céligny, Canton Geneva, Switzerland, on August 19, 1923.

SEE ALSO Authoritarianism; Elites; Fascism; Free Trade; Lausanne, School of; Liberalism; Marginalism; Mathematical Economics; Mill, John Stuart; Pacifism; Pareto Optimum; Sociology; Utility Function; Walras, Léon

BIBLIOGRAPHY

Busino, Giovanni. 1989. LItalia di Vilfredo Pareto. Economia e Società in un carteggio del 18731923. 2 vols. Milan, Italy: Banca Commerciale Italiana.

Pareto, Vilfredo. 1906. Manual of Political Economy. Trans. Ann S. Schwier, eds. Ann S. Schwier and Alfred N. Page. London: Macmillan, 1972.

Pareto, Vilfredo. 1916. Mind and Society. Trans. Andrew Bongiorno and Arthur Livingston with the advice and the cooperation of James Harvey Rogers. London and New York: Routledge, 2003.

Pareto, Vilfredo. 19642005. Oeuvres Complètes. 32 vols. Geneva, Switzerland: Droz.

Fiorenzo Mornati

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Pareto, Vilfredo

Vilfredo Pareto (vēlfrĕ´dō pärĕ´tō), 1848–1923, Italian economist and sociologist, b. Paris, of an exiled noble family that returned to Italy in 1858. He studied mathematics and engineering in Turin and worked as an engineer for many years, meanwhile becoming increasingly interested in social and economic problems. His economic writings won him (1893) a professorship of political economy at the Univ. of Lausanne. His notable contribution in applying mathematics to economic theory is found especially in Cours d'économie politique (1896–97). In his sociological studies he sought to differentiate the rational and nonrational factors in social action. He used that concept as the basis for his theory of the cyclical development and fall of governing elite groups. One of the originators of welfare economics, he defined total welfare as an improvement in a person's condition that was not achieved at any other person's expense. His chief work in sociology, Trattato di sociologia generale (1916), has been translated as Mind and Society (4 vol., 1935).

See G. C. Homans and C. P. Curtis, Jr., An Introduction to Pareto: His Sociology (1934, repr. 1970); study by F. Borkenau (1936); J. H. Meisel, ed., Pareto and Mosca (1965); R. Cirillo, The Economics of Vilfredo Pareto (1979); J. Freund, Pareto (tr. 1988).

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Pareto, Vilfredo

Pareto, Vilfredo (1848–1923) An Italian economist and sociologist, subject of an extensive treatment in Talcott Parsons's The Structure of Social Action (1937) as a co-founder of the ‘voluntaristic theory of action’, but since largely ignored by sociologists.

Already famous for his contributions to equilibrium theory as a mathematical economist, in his later years Pareto turned his hand to sociology, and in 1916 published his magnum opus the Trattato di sociologia generale (translated in four volumes as The Mind and Society in 1935). Although some read it as a proto-fascist work, the publication of the Trattato confirmed Pareto's fame in his own lifetime, although little of this reputation has survived into the present. Pareto is probably best known today for being the first person to use the term ‘élite’ to refer to the few who rule the many. He also exerted an early influence on the development of social systems theory. Samuel E. Finer's Vilfredo Pareto, Sociological Writings (1966) contains a useful selection of his most important sociological texts, together with a substantial introductory essay by Finer himself. See also ÉLITE THEORY; PARETO PRINCIPLE.

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