PARETO, VILFREDO. — Economist, of Genoese family, born on 15 July 1848 in Paris, where his father Raffaele was an exile following the Genoese uprisings of 1834; died at Céligny on 20 August 1923. He graduated in engineering from the Polytechnic of Turin in 1869. He was director of the mines at S. Giovanni Valdarno, where he was led to examine economic problems after reading Pantaleoni’s treatise Economia pura. Having abandoned business, in 1891 he accepted the chair of political economy at the University of Lausanne. After leaving teaching in 1907, he retired to his villa at Céligny on Lake Geneva.
His name is linked above all with the theory of economic equilibrium, already conceived by Walras, but which he developed in all its generality. In the economic universe there are obstacles that limit the freedom of movement of individuals, and the configuration of equilibrium is reached when the movements desired by the subject — P. says, willed by tastes — are impeded by obstacles. The configuration of equilibrium thus derives from the contrast between tastes and obstacles, and the condition that the movements desired by tastes be impeded by obstacles (or, which amounts to the same thing, that those compatible with the obstacles are not willed by tastes) represents the general condition of economic equilibrium. And since obstacles generally represent the limitation of means, that is, of human resources, whereby what is possessed, consumed, employed, or saved by one subject, or by the same subject for a particular purpose, is withdrawn from all other subjects and from all other purposes, it follows that the system of obstacles binds together, as a whole, all the movements of all persons present in the market. Conclusion: economic phenomena are not linked by simple cause-and-effect relationships, but by relationships 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 particular sector may provoke indirect, unforeseen, and undesired reactions in other sectors, so a measure directed toward an end of social justice may in practice instead become an instrument and source of new injustice. It constitutes the condemnation of economic dirigisme. No human mind is capable of taking the place of the market in determining the reciprocal positions of individuals, that is, of bringing about those adjustments that occur in the market through fluctuations in prices. The common people are led to see in the monetary instrument the determining cause of the phenomenon: the Paretian schema demonstrates the futility of this conception: equilibrium arises from the contrast between tastes and obstacles, that is, from the primary elements at work; prices measure, but do not create, the tension of the system.
The economic drama is thus reduced to its essential foundations, human needs and the means of satisfying them; it is merely one aspect of the human drama, in which activity directed toward satisfying material needs interferes with the higher activity expressed in the spheres of politics, art, culture, and religion. It can then be understood how, having reached this point, P. was led to break through 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 leads into the theory of social equilibrium. It is expounded in the Trattato di sociologia, the last of the great Paretian works, itself wholly
made possible by the concept of mutual dependencies. Historical materialism had attempted to reduce every human phenomenon to the common denominator of the economic fact, classifying religion, politics, and art as superstructures and epiphenomena. By recognizing the full autonomy of the needs of the spirit, and highlighting the mutual dependencies that exist among them and with the economic categories, P., while remaining outside Christian thought, appears as a restorer of the moral values that form the foundation of our civilization.
P. was also an innovator in the field of statistics, and his “income curve,” in which the ordinate measures the number (frequency density) of incomes whose amount is equal to the abscissa, constituted the first of his great discoveries. By demonstrating 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 achieved wide dissemination and today constitutes one of the fundamental instruments of economic analysis.
P.’s principal works are: Cours d'économie politique (Lausanne 1897; Italian translation, Turin 1942); Les systèmes socialistes (Paris 1902); Manuale di economia politica (Milan 1906); Trattato di sociologia (Florence 1917; 2nd ed., there 1923); Fatti e teorie (there 1920); Trasformazione della democrazia (Milan 1921).