Pareto, Vilfredo (1848–1923)

Vilfredo Federico Damaso Pareto was a famed economist and sociologist. He is best known for the economic concept of Pareto efficiency (or Pareto optimality). He made other wide-ranging contributions to economics that since the late 1930s have greatly influenced modern conceptions of demand, welfare, and planning. Pareto's law asserts that distribution of income and wealth follows a regular logarithmic formula. (Pareto charts are a standard statistics display tool.) He also made important contributions to sociology and moral philosophy.

Vilfredo was the only son of a nobleman, who was living in Paris in exile from Genoa for his nationalist views, and a Frenchwoman. The family returned to Italy, where the elder Pareto worked as an engineer. He made a comfortable living raising his family in a middle-class environment, providing many advantages to the young Vilfredo.

Pareto was educated in both France and Italy, graduating at the top of his class in civil engineering in 1870 from the Istituto Politecnico of Turin. Mathematical training and ideas of mechanical equilibrium shaped his contributions to economics. An ardent advocate for free enterprise and free trade, against state subsidies or protection for industry, and against militarism, the strong-willed and self-confident Pareto made his views known in writing and in public lectures that offended political leaders and sometimes led to police action.

From the early 1870s, he worked in Italy as a civil engineer, including being a director of two railway companies, and as a deputy manager and then a director with an iron company. He resigned in 1890 to conduct independent research. He had also lost a large sum speculating on iron in the London markets.

He inherited but never used his father's title of marchese (marquis). In 1889, Pareto married a Russian. This marriage broke down 12 years later when his wife left him. In 1902, Pareto met a Frenchwoman, and the two lived devotedly together, marrying shortly before Pareto's death in 1923. Pareto changed citizenship to the city-state of Fiume to divorce his first wife.

The important Italian economist Maffeo Pantaleoni (1857–1924) met Pareto in 1890 and, noting Pareto's interest in applying mathematics to economics, suggested that he study the work of Léon Walras (1834–1910). Pareto and Walras met. Pareto then published a series of theoretical articles applying mathematics to the analysis of economic policies, featuring Walras's general equilibrium approach. These articles and Pantaleoni's strong recommendation led to Walras's decision that Pareto succeed him in the chair of political economy at the University of Lausanne (Switzerland) in 1893.

Pareto's major works in economics, Cours d'économie politique and Manuale di economia politica, helped develop the Walrasian approach. Subsequently, Pareto concentrated on sociology and had his chair broadened to political and social studies. After his retirement, Trattato di sociologia generale and other sociological works appeared. Pareto argued that eternal class struggle is a circulation of power elites promoting sham ideologies.

Pareto later changed his view on free trade. He argued that social planners, aided by a Walrasian model of the economy, could be as efficient as unfettered markets. His [Page 1562]belief in democratic liberalism had faded. Although the Fascists invoked his name as intellectual camouflage, Pareto was disdainful of Mussolini's movement and declined many proffered Fascist honors.

...