PARETO, VILFREDO. - Economist, from a Genoese family, b. 15 July 1848 in Paris, where his father Raffaele was an exile following the Genoese uprisings of 1834, d. at Céligny on 20 Aug. 1923. He graduated in engineering from the Polytechnic of Turin in 1869. He was director of the mines of S. Giovanni Valdarno, where he found himself led to examine economic problems, after reading Pantaleoni's treatise on Pure Economics. Having abandoned business, he accepted in 1891 the chair of political economy at the University of Lausanne. Having left teaching in 1907, he retired to his villa at Céligny on Lake Geneva.
His name is linked above all to the theory of economic equilibrium, already conceived by Walras, but which he developed in all its generality. In the economic universe there are obstacles, which limit the freedom of movement of individuals, and the configuration of equilibrium is reached when the movements that would be desired by the subject - P. says willed by tastes - are impeded by the obstacles. The configuration of equilibrium thus derives from the contrast between tastes and obstacles, and the condition that the movements that would be desired by tastes be impeded by the obstacles (or, what amounts to the same thing, that those which would be compatible with the obstacles are not willed by tastes) represents the general condition of economic equilibrium. And since the obstacles represent in general the limitation of means, that is, of human resources, whereby what is possessed, consumed, employed, saved by one subject or by the same subject for a determined purpose is subtracted from all other subjects and from all other purposes, it follows that the system of obstacles binds in its entirety all the movements of all the persons present on the market. Conclusion: economic phenomena are not linked by simple relations of cause and effect, but by relations of mutual dependence.
This conclusion explains the profound reason for the difficulties that arise in economic governance, because, just as in general a measure implemented in a determined sector can provoke in other sectors indirect, unforeseen and undesired reactions, so it can happen that a measure, directed toward an end of social justice, may in concrete terms, instead, become an instrument and source of new injustice. It constitutes the condemnation of economic dirigisme. There is no human mind capable of substituting itself for the market in determining the reciprocal positions of individuals, that is, of provoking those adjustments that in the market occur through the fluctuation of prices. The common crowd is led to see in the monetary instrument the determining cause of the phenomenon: the Paretian schema demonstrates the vanity of this conception: equilibrium is born from the contrast between tastes and obstacles, that is, from the primitive elements that are in play: prices measure, they do not create the tension of the system.
The economic drama is thus reduced to its essential foundations, human needs and the means to satisfy them; it is nothing but one aspect of the human drama, in which the activity directed at satisfying material needs interferes with the higher activity that is manifested in the sectors of politics, art, culture, and religion. One understands, then, how, having reached this point, P. was led to break the barriers that kept the scene within the framework of material interests, in order to investigate the reasons for human conduct under the most general hypotheses. The theory of economic equilibrium thus opens out into the theory of social equilibrium. This is set forth in the Trattato di sociologia, the last of the great Paretian works, entirely permitted also by the concept of mutual dependencies. Historical materialism had attempted to reduce every human phenomenon to the common denominator of the economic fact, qualifying religion, politics, and art as superstructures, epiphenomena. By recognizing the full autonomy of the needs of the spirit, by bringing to light the mutual dependencies that subsist among them and with the economic categories, P., while remaining outside Christian thought, appears as a restorer of moral values, which are the foundation of our civilization.
P. was an innovator also in the field of statistics, and his "curve of incomes," in which the ordinate measures the number (density of frequencies) of incomes whose amount is equal to the abscissa, constituted the first of his great discoveries. With the demonstration of the invariance of this curve in space and time - within the limits of the experience of Western civilization - he opened the way to research in inductive economics on a statistical basis, which subsequently had wide diffusion and today constitute one of the fundamental instruments of economic analysis.
The principal works of P. are: Cours d'économie politique (Lausanne 1897; Italian trans., Turin 1942); Les systèmes socialistes (Paris 1902); Manuale di economia politica (Milan 1906); Trattato di sociologia (Florence 1917; 2nd ed., ibid. 1923); Fatti e teorie (ibid. 1920); Trasformazione della democrazia (Milan 1921).