1848-1923
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 Mill’s 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 Leon 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 Walras’s demonstration of the optimality of free competition and some criticisms by Pantaleoni and Enrico Barone about a first tentative Pareto’s 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 actions—and they are the majority of all actions—that 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 Mussolini’s regime.
Pareto died in Celigny, Canton Geneva, Switzerland, on August 19, 1923.
