Vilfredo Federico Damaso Pareto[4] (/pəˈreɪtoʊ/;[5]Italian:[paˈreːto]; bornWilfried Fritz Pareto;[6] 15 July 1848 – 19 August 1923) was an Italianpolymath, whose areas of interest includedsociology,civil engineering,economics,political science, andphilosophy. He made several important contributions to economics, particularly in the study ofincome distribution and in the analysis of individuals' choices, and was one of the minds behind theLausanne School of economics. He was also responsible for popularising the use of the termelite in social analysis and contributed toelite theory. He has been described as "one of the lastRenaissance scholars. Trained inphysics andmathematics, he became a polymath whose genius radiated into nearly all other major fields of knowledge."[7]
He introduced the concept ofPareto efficiency and helped develop the field ofmicroeconomics. He was also the first to claim that income follows aPareto distribution, which is apower law probability distribution. ThePareto principle was named after him, and it was built on his observations that 80% of the wealth in Italy belonged to about 20% of the population. He also contributed to the fields of mathematics and sociology.
Pareto was born of an exiled nobleGenoese family on 15 July 1848 in Paris,[8] the centre of the popular revolutions of that year. His father, Raffaele Pareto (1812–1882), was an Italian civil engineer andLigurian marquis who had left Italy much asGiuseppe Mazzini and other Italian nationalists had.[9] His mother, Marie Metenier, was a French woman. Enthusiastic about therevolutions of 1848 in the German states, his parents named him Wilfried Fritz, which became Vilfredo Federico upon his family's move back to Italy in 1858.[10]
In his childhood, Pareto lived in amiddle-class environment, receiving a high standard of education, attending the newly createdIstituto Tecnico Leardi whereFerdinando Pio Rosellini was his mathematics professor.[11] In 1869, he earned a doctorate in engineering from what is now thePolytechnic University of Turin,[9] then known as the Technical School for Engineers, with a dissertation entitled "The Fundamental Principles of Equilibrium in Solid Bodies". His later interest in equilibrium analysis ineconomics andsociology can be traced back to this dissertation. Pareto was among the contributors to the Rome-based magazineLa Ronda between 1919 and 1922.[12]
From civil engineer to classical liberal economist
For some years after graduation, Pareto worked as acivil engineer, first for the state-owned Italian Railway Company and later in private industry. He was manager of the Iron Works of San Giovanni Valdarno and later general manager of Italian Iron Works.[9] He did not begin serious work in economics until his mid-forties. He started his career as a fiery advocate ofclassical liberalism, besetting the most ardent British liberals with his attacks on any form of government intervention in thefree market. In 1886, he became a lecturer oneconomics andmanagement at theUniversity of Florence. His stay inFlorence was marked by political activity, much of it fueled by his own frustrations with government regulators. In 1889, after the death of his parents, Pareto changed his lifestyle, quitting his job and marrying a Russian woman, Alessandrina Bakunina.[8]
In 1893, Pareto succeededLéon Walras to the chair of Political Economy at theUniversity of Lausanne in Switzerland where he remained for the rest of his life.[9] He published there in 1896–1897 a textbook containing thePareto distribution of how wealth is distributed, which he believed was a constant "through any human society, in any age, or country".[9] In 1906, he made the famous observation that twenty per cent of the population owned eighty per cent of the property in Italy, later generalised byJoseph M. Juran into the Pareto principle, also termed the80–20 rule. Pareto maintained cordial personal relationships with individualsocialists but always thought their economic ideas were severely flawed. He later became suspicious of their motives and denounced socialist leaders as an "aristocracy of brigands" who threatened to despoil the country and criticized the government of the Italian statesmanGiovanni Giolitti for not taking a tougher stance against worker strikes. Growing unrest among labour in theKingdom of Italy led him to the anti-socialist and anti-democratic camp.[13] His attitude towardsItalian fascism in his last years is a matter of controversy.[14][15]
Pareto's relationship with scientific sociology in the age of the foundation is grafted in a paradigmatic way at the moment in which he, starting from the political economy, criticizespositivism as a totalizing and metaphysical system devoid of a rigorous logical-experimental method. In this sense we can read the fate of the Paretian production within a history of the social sciences that continues to show its peculiarity and interest for its contributions in the 21st century.[16] The story of Pareto is also part of the multidisciplinary research of a scientific model that privileges sociology as a critique of cumulative models of knowledge as well as a discipline tending to the affirmation of relational models of science.[17][18]
In 1889, Pareto married AlessandrinaBakunina, a Russian woman. She left him in 1902 for a young servant. Twenty years later in 1923, he married Jeanne Regis, a French woman, just before his death inGeneva, Switzerland, on 19 August 1923.[8]
Pareto's later years were spent in collecting the material for his best-known work,Trattato di sociologia generale (1916) (The Mind and Society, published in 1935). His final work wasCompendio di sociologia generale (1920). In hisTrattato di Sociologia Generale (1916, rev. French trans. 1917), published in English byHarcourt, Brace, in a four-volume edition edited byArthur Livingston under the titleThe Mind and Society (1935), Pareto developed the notion of thecirculation of elites, the firstsocial cycle theory in sociology. He is famous for saying "history is a graveyard of aristocracies".[19]
Pareto might have turned to sociology for an understanding of why his mathematical economic theories did not always predict actions of individuals in practice, in the belief that unforeseen or uncontrollable social factors intervened. His sociology holds that much social action is nonlogical and that much personal action is designed to give spurious logicality to non-rational actions. We are driven, he taught, by certain "residues" and by "derivations" from these residues. The more important of these have to do with conservatism and risk-taking, and human history is the story of the alternate dominance of these sentiments in the ruling elite, which comes into power strong in conservatism but gradually changes over to the philosophy of the "foxes" or speculators. A catastrophe results, with a return to conservatism; the "lion" mentality follows. This cycle might be broken by the use of force, says Pareto, but the elite becomes weak and humanitarian and shrinks from violence.[20]
Among those who introduced Pareto's sociology to the United States wereGeorge C. Homans andLawrence Joseph Henderson at Harvard, and Paretian ideas gained considerable influence, especially on Harvard sociologistTalcott Parsons, who developed a systems approach to society and economics that argues thestatus quo is usually functional.[21] The American historianBernard DeVoto played an important role in introducing Pareto's ideas to these Cambridge intellectuals and other Americans in the 1930s.Wallace Stegner, in his biography of DeVoto, recounts these developments and says this about the often misunderstood distinction between "residues" and "derivations". He wrote: "Basic to Pareto's method is the analysis of society through its non-rational 'residues,' which are persistent and unquestioned social habits, beliefs, and assumptions, and its 'derivations,' which are the explanations, justifications, and rationalizations we make of them. One of the commonest errors of social thinkers is to assume rationality and logic in social attitudes and structures; another is to confuse residues and derivations."[22]
Renato Cirillo wrote that Pareto had frequently been considered a predecessor offascism as a result of his support for the movement when it began. Cirillo disagreed with this interpretation, suggesting that Pareto was critical of fascism in his private letters.[23] Pareto argued that democracy was an illusion and that a ruling class always emerged and enriched itself. For him, the key question was how actively the rulers ruled. For this reason, he called for a drastic reduction of the state and welcomedBenito Mussolini's rule as a transition to this minimal state so as to liberate the perceived pure economic forces.[24]
As a young student, Mussolini had attended some of Pareto's lectures at theUniversity of Lausanne in 1904. It has been argued that Mussolini's move away from socialism towards a form ofelitism may be attributed to Pareto's ideas.[25]Franz Borkenau, a biographer, argued that Mussolini followed Pareto's policy ideas during the beginning of his tenure as prime minister.[26]: 18 Karl Popper dubbed Pareto the "theoretician of totalitarianism";[27] according to Cirillo, there is no evidence in Popper's published work that he read Pareto in any detail before repeating what was then a common but dubious judgement in anti-fascist circles.[14]
Pareto turned his interest to economic matters, and he became an advocate offree trade, finding himself in conflict with the Italian government. His writings reflected the ideas ofLéon Walras that economics is essentially a mathematical and natural science.[28] He tried to sketch economics in analogy to mechanics, explicitly linking pure (and applied) economics to pure (and applied) mechanics,[29] presenting a concordance table relating the two sciences.[30][31][32] Pareto was a leader of the "Lausanne School" and represents the second generation of theNeoclassical Revolution. His "tastes-and-obstacles" approach togeneral equilibrium theory was resurrected during the great "Paretian Revival" of the 1930s and has influenced theoretical economics since.[33] In hisManual of Political Economy (1906) the focus is on equilibrium in terms of solutions to individual problems of "objectives and constraints". He used the indifference curve of Edgeworth (1881) extensively, for the theory of the consumer and, another great novelty, in his theory of the producer. He gave the first presentation of the trade-off box now known as the "Edgeworth-Bowley" box.[34]
Pareto was the first to realize that cardinal utility could be dispensed with, and economic equilibrium thought of in terms of ordinal utility,[35] that is, it was not necessary to know how much a person valued this or that, only that he preferred X of this to Y of that. Utility was a preference-ordering. With this, Pareto not only inaugurated modern microeconomics but he also attacked the alliance of economics and utilitarian philosophy, which calls for the greatest good for the greatest number; Pareto saidgood cannot be measured. He replaced it with the notion of Pareto-optimality, the idea that a system is enjoying maximum economic satisfaction when no one can be made better off without making someone else worse off. Pareto optimality is widely used in welfare economics and game theory. A standard theorem is that a perfectly competitive market creates distributions of wealth that are Pareto optimal.[36]
Some economic concepts based on Pareto's work are still in use in the 21st century. ThePareto chart is a special type ofhistogram, used to view the causes of a problem in order of severity from largest to smallest. It is a statistical tool that graphically demonstrates the Pareto principle or the 80–20 rule. The Pareto principle concerns the distribution of income, while thePareto distribution is aprobability distribution used, among other things, as a mathematical realization of Pareto's law, andOphelimity is a measure of purely economic satisfaction. ThePareto index is a measure of the inequality of income distribution. Pareto argued that in all countries and times the distribution of income and wealth is highly skewed, with a few holding most of the wealth. He argued that all observed societies follow a regular logarithmic pattern: where N is the number of people with wealth higher than x, and A and m are constants. Over the years, Pareto's law proved remarkably close to observed data, with economists typically finding it plausible according to theEncyclopædia Britannica. The Pareto efficiency is generally not very discriminating while the concept of potential Pareto-efficiency, also known as Kaldor-Hicks efficiency, is more discriminating and is widely used in economics. A common criticism outside of economics is that it relies on subjective preferences.[37] According toOxford Reference, the Pareto principle can be controversial inwelfare economics since its assumptions are empirically questionable, may embody value-judgements, and tend to favour thestatus quo. As a result of its silence on the initial distribution of resources, most sociologists are also critical of Paretian welfare economics.[38]
withBo Gabriel Montgomery.Politique financière d'aujourd'hui, principalement en considération de la situation financière et économique en Suisse. Attinger Frères, 1919.[39]
Fatti e teorie (in Italian), 1920. (Collection of previously published articles with an original epilogue)
Trasformazione della democrazia (in Italian), 1921. (Collection of previously published articles with an original appendix)
The Mind and Society. Translated by Bongiorno, Andrew; Livingston, Arthur. New York: Harcourt, Brace and Company. 1935. (translation ofTrattato di sociologia generale). (Vol. I,Vol. II,Vol. III,Vol. IV)
Compendium of General Sociology, University of Minnesota Press, 1980 (abridgement ofThe Mind and Society; translation ofCompendio di sociologia generale).
Sociological Writings, Praeger, 1966 (translations of excerpts from major works).
Manual of Political Economy,Augustus M. Kelley, 1971 (translation of 1927 French edition ofManuale di economia politica con una introduzione alla scienza sociale).
The Transformation of Democracy, Transaction Books, 1984 (translation ofTrasformazione della democrazia).
The Rise and Fall of Elites: An Application of Theoretical Sociology, Transaction Publishers, 1991 (translation of essayUn applicazione di teorie sociologiche).
^abc"The Encyclopedia Sponsored by Statistics and Probability Societies". StatProb. 19 August 1923. Archived fromthe original on 4 March 2016. Retrieved4 November 2015.among a menagerie of cats that he and his French lover kept [in their villa;] the local divorce laws prevented him from divorcing his wife and remarrying until just a few months prior to his death.
^Giacalone-Monaco, Tommaso (1966). "Ricerche intorno alla giovinezza di Vilfredo Pareto".Giornale degli Economisti e Annali di Economia (in Italian).25 (1/2):97–104.ISSN0017-0097.JSTOR23239355.
^Bellamy, Richard (1990). "From Ethical to Economic Liberalism – The Sociology of Pareto's Politics".Economy and Society.19 (4):431–55.doi:10.1080/03085149000000016.
^abCirillo, Renato (1983). "Was Vilfredo Pareto really a 'precursor' of fascism?".American Journal of Economics and Sociology.42 (2):235–246.doi:10.1111/j.1536-7150.1983.tb01708.x.JSTOR3486644.Vilfredo Pareto has been labelled a fascist and 'a precursor of fascism' largely because he welcomed the advent of fascism in Italy and was honoured by the new regime. Some have seen in his sociological works the foundations of fascism. This is not correct: Even fascist writers did not find much merit in these works, and definitely condemned his economic theories. As a political thinker, he remained a radical libertarian till the end and continued to express serious reservations about fascism, and to voice opposition to its basic policies. This is evident from his correspondence with his close friends. There are strong reasons to believe that, had he lived long enough, Pareto would have revolted against fascism
^Campbell, Stuart L. (1986). "The four Paretos of Raymond Aron".Journal of the History of Ideas.47 (2):287–298.doi:10.2307/2709815.JSTOR2709815.
^Giovanni Busino,Sugli studi paretiani all'alba del XXI secolo inOmaggio a Vilfredo Pareto,Numero monografico in memoria di Giorgio Sola a cura di Stefano Monti Bragadin, "Storia Politica Società", Quaderni di Scienze Umane, anno IX, n. 15, giugno-dicembre 2009, p. 1 e sg.
^Guglielmo Rinzivillo,Vilfredo Pareto e i modelli interdisciplinari nella scienza, "Sociologia", A. XXIX, n. 1, New Series, 1995, pp. 2017–2222
^Guglielmo Rinzivillo,Una epistemologia senza storia, Rome, New Culture, 2013, pp. 13–29,ISBN978-8868122225
^Rossides, Daniel W. (1998)Social Theory: Its Origins, History, and Contemporary Relevance. Rowman & Littlefield. p. 203.ISBN1882289501.
^Eatwell, Roger; Anthony Wright (1999).Contemporary Political Ideologies. London: Continuum. pp. 38–39.ISBN082645173X.
^Di Scala, Spencer M.; Gentile, Emilio, eds. (2016).Mussolini 1883–1915: Triumph and Transformation of a Revolutionary Socialist. USA: Palgrave Macmillan.ISBN978-1137534866.
^Mandelbrot, Benoit; Richard L Hudson (2004).The (mis)behavior of markets : a fractal view of risk, ruin, and reward. New York: Basic Books. pp. 152–155.ISBN0465043577.
^Pareto, Vilfredo (1896).Cours d'économie politique professé à l'Université de Lausanne. Vol. 1. Lausanne: F. Rouge. p. iii.
^Glötzl, Erhard; Glötzl, Florentin; Richters, Oliver (2019). "From constrained optimization to constrained dynamics: extending analogies between economics and mechanics".Journal of Economic Interaction and Coordination.14 (3):623–642.doi:10.1007/s11403-019-00252-7.hdl:10419/171974.
^McLure, Michael; Samuels, Warren J. (2001).Pareto, economics and society the mechanical analogy. London: Routledge.
^Cirillo, Renato (1978)The Economics of Vilfredo Pareto
Tarascio, Vincent J. (1968)Pareto's Methodological Approach to Economics: A Study in the History of Some Scientific Aspects of Economic Thought 1968online editionArchived 4 May 2012 at theWayback Machine
Forte F., Silvestri P., Pareto's sociological maximum of the utility of the community and the theory of the elites, in J.G. Backhaus (ed.), Essentials of Fiscal Sociology. Conceptions of an Encyclopedia, Peter Lang, Frankfurt am Main, 2013, pp. 231–65.
Della Pelle, P., ed., Introduction to K. Marx, Le Capital par V. Pareto, critical edition with the Italian text opposite, Aracne, Canterano, 2018.
