SOURCE: "Vilfredo Pareto: His Life and His Economic Theories," in The Economics of Vilfredo Pareto, Frank Cass, 1979, pp. 7-25.

[In the following excerpt, Cirillo provides a biographical and historical perspective for an examination of Pareto's economic writings.]

THE MAN

Vilfredo Pareto was born in Paris on July 15, 1848 and died at Céligny, in the Canton of Geneva, on August 19, 1923. His family belonged to the Genoese nobility which governed the Republic till it was conquered by Napoleon. His father, Marchese Raffaele Pareto, typical of the youth of the Italian Risorgimento of the first half of the nineteenth century, was involved in a Mazzinian conspiracy, and at the age of twenty-four as a result was forced to leave Italy and live in Paris. Here he took ajob as a civil engineer and married Marie Metenier who bore him two daughters and one son, Vilfredo. One of the daughters, Cristina, died in 1893 of meningitis; the other, Nina, died of heart disease in 1906.

Due to a political change and also because of his proficiency in hydraulics, the Marchese Pareto was recalled to Italy. A few years later Pareto took a five year course in civà engineering at the University and the Polytechnical Institute of Turin and the first two years were mostly devoted to mathematics. This training was to serve him exceedingly well when he later undertook to work out his economic theories. The thesis for which he received a doctor's degree was a study of the fundamental principles of equilibrium in solid bodies. This was a treatise in mechanical equilibrium, but it also proved later to be the cornerstone of his fundamental conception of economics, and of his sociology as well. It seems that it was also at this time that he acquired a prodigious knowledge of Greek and Latin culture. He showed an even stronger passion for Greek as his footnotes to the Cours and II trattato testify.

Soon after he graduated, he accepted the post of railway engineer with a company in Rome. Later he became manager general of an iron-works enterprise, the Ferriere Italiane, which the Banca Generale had under its control in the Val d' Arno. After his father's death in 1882, Pareto relinquished his last job and became a consultant. In 1889 he married a girl from Venice, Alessandrina (Dina) Bakounine, daughter of a modest Russian family. She was quite an educated girl and knew German and English well; she even translated an article written by her husband into English.

From the start of his public life, Pareto manifested strong liberal feelings. He believed not only in economic liberalism, which was evident in his many writings advocating free trade, but also in other tenets of liberalism, such as the freedom of the press, universal suffrage and free primary education for all. He intervened frequently to voice these feelings in the meetings of the Georgophiles and the Adam Smith Society. There is enough evidence to show that till the end of the 19th century he was a great supporter of the opponents of the doctrine of the supremacy of the state (l'étatisme) which was prevalent in Italy during the last quarter of the nineteenth century. A self-confessed unbeliever throughout his life, Pareto embraced liberalism as a sort of religion and worshipped G. de Molinari as one of his gods. But he was also a humanist and a very active pacifist.

1876 was a turning point in the political history of Italy. The leftist party managed to overcome the rightists and drive them out of power which they had enjoyed for a long time. Many of the refonns of the new government (such as universal suffrage and free primary education) satisfied his aspirations; but after a wave of enthusiasm he soon became disenchanted with the party, mainly because the party chiefs, Depretis and Crispi, showed lack of principle and were in fact plain opportunists.

The party embarked on a policy of protectionism which resulted in various tariff wars with France. Pareto attacked this policy severely in the Giornale degli Economisti and the Monde Economique of Paris.

As years went by he got more and more involved in politics, so much so that in 1882 he presented himself as candidate for parliament, but suffered a crushing defeat. From that time he was not sure any more that the people knew best!

His lack of popularity in government circles became more evident in 1891 when the police stopped him from giving some public talks in Milan. As a result his disenchantment with Italian politics became stronger. He could accept many of the socialist ideas, but could not favour any form of intervention on the part of the state which he believed could be advantageous only to the bourgeoisie. In an article entitled 'Parliamentary Regime in Italy' which appeared in 1893 in the Political Science Quarterly he complained: ' … there is no true political party in this country but groups of people without convictions' .

Already at the time of the Milan incident he was contemplating leaving Italy for good. His frustration was complete. In that same year he wrote to Léon Walras: Ί wanted to give without remuneration a course in mathematical economics, but the government opposed it' .

This was the political Pareto, but what sort of man was the real Pareto during this period? He was definitely a man of contradictions. He remained essentially an aristocrat, even though his views on democracy, free trade and republicanism did not agree with those of the nobility. He even despised the aristocratic class for exploiting the poor. But he could not digest socialism either. He despised the socialists as well, yet he sympathized with the persecuted socialists, in the same fashion as when in spite of his anticlericalism he always defended the clergy and the Church when they were seriously attacked. He was essentially a social misfit; some even considered him a misanthropist. He isolated himself first from the aristocratic classes and then from the masses.

One of Pareto's most admirable qualities was that he could not stand corruption and incompetence, and he became involved in politics precisely because he thought that his intervention could help to lessen corruption in Italian political life. When he failed, he became disenchanted with parliamentary democracy and became adverse to any form of interference on the part of the government. His opposition stemmed mainly from his liberal philosophy though later on in his life he modified his views. But Pareto's laisser-faire type of liberalism was political rather than economic even though he tried to justify it on economic grounds. His was certainly different from the economic liberalism of his English contemporaries even though he thought otherwise. To voice adequately his philosophy he became an active member of the Adam Smith Society of Ferrara which fought against protective tariffs. It was also at this time that he took charge of the monthly publication called Cronache Italiane.

Between 1889 and 1893 he wrote about 167 articles, some of a scholarly nature but largely consisting of anti-government polemics. Though this made him unpopular in government circles, it also brought him friends from the circle of free trade writers. Among these was Maffeo Pantaleoni who became his life-long friend. It was after reading Pantaleoni's Elementi di economia pura that Pareto became interested in pure economics. And it was Pantaleoni who insisted that he contact Walras.

Léon Walras (1834-1910) was French and an engineer like Pareto, though his engineering career was mediocre. In 1870 Walras was appointed to the chair of economics in the Academy, known later as the University of Lausanne. His first ideas about general economic equilibrium go back to 1874 but, for about thirty years, his work, particularly in France, was largely ignored. Pareto was the first economist to appreciate Walras's outstanding pioneering contribution to economic thought. Walras was mainly concerned with social reform and economic theory was simply a tool for this end. At one time he even advocated land nationalization on the lines of Henry George. His enthusiasm for social reforms and peace even earned him a nomination for the Nobel prize for peace.

His contacts with Walras aroused a genuine interest in him for the mathematical treatment of the equilibrium system already developed by his predecessor, and stimulated him to make the first real contribution to economic theory.

Though Pareto appears for the first time as an economist at the age of fifty, we must recall that for many years he was working as an engineer and during this time he was solving many practical problems and digesting techniques which he later embodied in economic thought. His case, in fact, is not dissimilar from that of David Ricardo who went to economics after years of experience in the London Stock Exchange.

Pareto's first letter to Léon Walras was written on July 23, 1891. It seems that Walras was much impressed by the potentialities of the younger man, for on November 7, 1892 he offered to recommend him for the Chair of Economics which he was about to relinquish. In 1893 Pareto was officially approached by the University of Lausanne and was offered the Chair, which he accepted after some anxious days when he seriously feared that by going to Lausanne without the permission of the Italian government he might lose his Italian nationality. But, as a matter of fact, he managed to keep it till the end of his life.

To the teaching of political economy he soon added a course in sociology. This was his most fruitful period. It was in Switzerland that he published his four major works that were to establish his reputation:

Cours d'économie politique in two volumes (1896, 1897). This included most of the lectures he delivered during his first years at Lausanne. Next he published Les systèmes socialistes (1902); Manuale d' economia politica (1907), more commonly known as the Manuel after the French edition in 1909; and IL trattato di sociologia generale (1915), later translated into French and called Traitéde sociologie générale (1917).

He worked intensely, so much so that his first wife complained on various occasions that she had ' to meow with the cats being unable to chat with her too busy husband' . Though he was a good teacher, he was more concerned with research. ' Lecturing is a wasted time for science' , he complained to Pantaleoni. The fact that he found out that the students were not interested in mathematical economics did not help his urge for lecturing. In fact, everyone, including Walras, urged him to put as little mathematics as possible in his course—advice he accepted readily.

Because of his heart condition, he was already planning to retire in 1900. An unexpected event was also influencing his decision by then for in 1898 his uncle Dominique died and left him a considerable fortune. He became a rich man overnight. Unfortunately he invested most of this fortune in gold bought from the Bank of England. He lost most of this during the first World War when gold was requisitioned, and also because he made some bad investments. But he lived in luxury for quite some time with a big retinue of servants.

Meanwhile in 1901 his wife Dinaran away with the cook and went to Russia. She refused to join him in Paris where he went to give some important lectures. This made him so furious that he took immediate steps for a legal separation. Within a short time of his separation from Dina (she died in 1940) another woman came into his life who was to become his second wife—a French girl called Jeanine Regis (Jane, as he used to call her). She was 31 years his junior, but she managed to give him much more than his first wife. If there was not much love between them there was certainly companionship and understanding. Pareto, in fact, dedicated the Trattato to her.

Because of his Italian nationality he could not obtain a divorce from Dina. However, much later the Italian city of Fiume, which belonged to Hungary (a country which had divorce laws), became independent for a short time, thanks to Gabriele D' Annunzio, the poet-soldier, and many Italians took advantage of the situation to obtain a divorce; so did Pareto. Thus, a few days before he died, on June 19, 1923, Pareto legally married Jane.

It was around 1900 that a change in Pareto took place. From that time he became more interested in mathematical economics and pure theory and less interested in reforms, much to the disappointment of Léon Walras. He stopped being a fervent supporter of free competition and started modifying his opinion of protection. He also became more and more the hermit of Céligny. Though he decided to give up lecturing in 1906, he continued to give courses from time to time, and it was in May, 1916 that he gave a last series of lectures on sociology. Yet this was the period during which he reached the peak of his intellectual activity.

In the last years of his life he was a bitter man. He resented particularly the treatment he received from his country. In 1906 he was asked to teach a course in sociology for a few weeks at the University of Bologna—a gesture which pleased him immensely. He was looking forward to being offered a professorship at that time but when the offer came he was too sick to accept it.

During the last six years of his life he hardly left the villa because of his heart ailment. His only joy was his cats which numbered a score at one time. They had precedence over anyone else and were given food before his visitors. His irony and sarcasm, which alienated many of his friends, became more pronounced as is evident from his later writings. One can say that his life was over even before his death. Ί want to follow events without wishing to take the least part in them' , was one of the last statements he made to Pantaleoni.

pareto and Fascism

During the crucial period 1914-1922 Pareto witnessed the social and political disorganization of Italy with dismay, and once more he became involved in politics. When fascism triumphed in Italy, Mussolini made him, together with Maffeo Pantaleoni, who was definitely a fascist, one of the first senators of Italy. Much has been written on what sort of a ' fascist' Pareto was, if he ever was one.

It seems that he underwent a change in his feelings towards fascism. Before it came to power, he was sceptical as to its purpose, and even more so as to its ability to create the kind of Italy he dreamed of. Thus, in a letter to Giacalone Monaco (June, 1921) he wrote: Ί may be wrong, but I don' t see in fascism a permanent and profound force' .

When fascism gained power he seemed to be more favourable towards it but he kept insisting that the fundamental freedoms be safeguarded and warned the fascist hierarchy not to enter into an alliance with the Church. One cannot help recalling that when fascism triumphed in Italy, Pareto had only ten months to live. It must have seemed to him, after a life-time of disappointment with the politics of his country, that a sort of messianic revolution was taking place. But anyone who knew Pareto well would have bet that later, when fascism became as corrupt and despotic as the previous regimes, he would have attacked it as bitterly as he attacked the previous parties and governments.

There is no doubt that the new fascist government regarded with sympathy the man whose sociological theories could be interpreted as favouring the new doctrine.

In December, 1922 Pareto was asked to represent Italy on the Commission of Disarmament at the League of Nations in Geneva. He had to decline for health reasons. But when in March, 1923 he was named senator, he accepted.

THE ECONOMIST

One cannot really understand adequately a thinker of the calibre of Pareto without some knowledge of the intellectual climate in which he lived. I am here limiting myself to the more relevant characteristics of his times and the conditions under which his thought was developing.

By the second half of the nineteenth century most of Europe had already entered an advanced stage of industrialization. Admittedly progress was uneven and some countries, particularly Britain and France, were ahead of other countries not only industrially but economically and politically as well. No country, however, was immune to the challenge of the new age. The new techniques and innovations were having a lasting effect not just on the political structure of Europe, but also on every aspect of its cultural and social life as well. Hence, the social disciplines, particularly social philosophy, sociology and economics were sensitive to the radical changes that were taking place. At the same time they were facing the supreme challenge in that in a predominantly scientific age they could not survive if they failed to become true sciences.

It was during this period that Pareto was actively engaged in his economic studies which lasted till 1912, when he turned to sociological research. This was also the time when the theories of the Classical School were being constantly attacked by the adherents of Marxism as well as by the members of the German Historical School. Defending the Classicists were the English and French liberal economists. But most of the arguments advanced on both sides were basically ethical in nature. Hence, there was no way of defending economics on its own grounds.

Pareto, who started his career as a champion of a laissezfaire type of liberalism, soon realized that political economy as it was then with all its ethical connotations, could not command respectability, much less win the argument against the Marxists. He became fully aware of the paramount need to establish ethical neutrality in the social disciplines for without it there was no chance of their ever being accepted as sciences. To achieve this the scope of economics and sociology needed to be clearly defined. There was much sociology that was being labelled economics and vice versa. By defining the respective fields of the two disciplines and clearly marking their boundaries, they could be set on the way to the progress which so far had been denied them. Beside these considerations, Pareto's mind was preoccupied with the significance of empirical research and the impact it could have on theory.

These were the preoccupations that engaged his mind, and by the time he was writing the Manuel he felt confident enough to advance solutions to the problems which were troubling him. Even if his efforts were not as successful as he thought, Pareto should earn the admiration if not the gratitude at least of those who appreciate the efforts of his contemporaries, such as the Austrian economists, and Jevons, Marshall, Wicksteed, Edgeworth and Wicksell.

When he started corresponding with Maffeo Pantaleoni at the age of 42 he was already familiar with the works of Cournot, Walras and Marshall. He had a long way to go before he wrote the Manuel, but by the time he came to write it his break with the past was complete. By then he had rejected the marginal utility theories of Walras, Menger and Jevons and at the same time became an ardent proponent of ethical neutrality. In the process he also turned his back on the English economists with their emphasis on partial equilibrium analysis and developed the theory of general economic equilibrium of his prede cessor.

Pareto's contributions to economics are numerous and varied, but they are also of uneven quality. Nevertheless they all reflect not only his mind but his personality as well. They are striking in many respects, so much so that, unlike Léon Walras, he managed to form a school of devoted disciples and followers.

One or two qualities he possessed could throw some light on the inconsistencies and contradictions which sometimes are evident in his thought to the dismay of his admirers and students alike. One such quality, which made him unpopular in his life and sometimes affected his scientific outlook, was that he could not stand adverse criticism. He resented intensely his critics and this led him to despise their works irrespective of their merits. The only exception he made was in the case of Léon Walras, whose basic theories at least he continued to admire even when he stopped admiring the man because of his approach to applied economics and his socialistic tendencies. But he had little sympathy for either Marshall, Edgeworth or Fisher.

His attitude towards Alfred Marshall was typical. He never appreciated Marshall's use of partial equilibrium analysis. Thus he expressed his feelings: ' Marshall has not yet managed to grasp the idea of economic equilibrium … He adds nothing remarkable to our knowledge' . On another occasion he wrote: ' But I must say that the English proposition of the constant utility of money is asinine.… I keep on saying that the theories of the classical economists are better than those of Marshall with their mathematical frills' .

One wonders how Pareto could be not only ungenerous but also ignorant of such important contributions as Marshall' s. The true reason can only be found in his impetuous passionate character which at times blinded his deep sense of perception and appreciation and made him fall into all sorts of contradictions. In the case of Marshall this contradiction is evident when one compares the above utterances to what he wrote one day about Walras:

He (Walras) insists at length on the points separating him from Aupitz and Lieben, because, according to him one must take account of the prices of all goods. In theory he is right, but in practice it would no longer be possible to solve a single problem.

It is hard to believe that Pareto could not sense that this was the best defence he could make for Marshallian analysis. It seems that by the time he was criticizing Walras, his mind had no place for Marshall or anyone else!

Sometimes his hostility for an economist grew progressively so that he became more and more suspicious that the latter was his declared or undeclared enemy. This is what happened in the case of Edgeworth. First, he resented Edgeworth because he ignored him; later, when he criticized him Pareto became furious and called him ' a real Jesuit [who] could only show how to solve the equations of exchange. These are the only ones he knows' . Ironically this happened to be the man from whom Pareto borrowed so much for his theory of utility!

He was also obsessed with the ignorance not only of people in general, but in particular with that displayed by his contemporary economists. This made him at one time doubt whether economic science should be taught at all!

It might be interesting to answer the question why Pareto, who made few original contributions to economic theory, should have left such a mark on economic thought. I think the secret of Pareto's greatness lies in the fact that he had such a wide vision of social life and society. His interest in economics was never exclusive; his works on sociology are ample evidence of this vision. Even his obsession with general equilibrium was derived from his determination to use it as a tool of analysis to be applied not just to economics but all the other social sciences as well. He was convinced that society encountered so many problems and with such frequency because it swerved very often from positions of stable equilibrium. To Pareto these problems involved and affected not only the ' homo oeconomicus' but also the ' homo politicus, religiosus, ethicus' .

Another reason for his distinction in the history of thought is that Pareto was, as has been rightly called, a competent artisan. He knew which tools to borrow from other economists and handled them extremely well. When in the process he discovered new ideas he worked on them and managed to produce new techniques. Moreover, Pareto always looked and thought beyond his immediate task. Unfortunately his wealth of ideas sometimes prevented him from developing the more promising ones. Thus, some ideas remained in an embryonic state only to be discovered from time to time in his rather obscurer statements.

THE COURS AND THE MANUEL

Pareto was not satisfied with his first major work, Cours d'économie politique. As a matter of fact, he never agreed to see it reprinted because he intended to make some important changes in it. It seems that when the Manuel was published he was satisfied that it had replaced the Cours. In the ' proemio' to the Manuel he did criticize the Cours, particularly for ' some subjective considerations' which he made in it, and also because he had professed too much faith in economic freedom.

It is strange that Bousquet, his biographer, thinks that the Cours looks mainly to the future, and that it is such a contribution to economics that this work alone ' could have been sufficient to make Pareto a great economist' . This opinion is not at all shared by other scholars. There is, of course, agreement that in the Cours Pareto gives a much clearer version of Walras's theory, the exposition of which in the Eléments Bousquet describes as ' detestable, tedious, prolix and such that it turns away men of good will' . No doubt Pareto had the advantage of explaining the theory to his students and in the process he rendered it more intelligible.

Yet, on the whole the Cours makes little contribution to economic theory. Out of about 800 pages not more than 75 are concerned with pure theory. The presentation is chaotic; for example, it is hard to understand why production is treated after banking and social evolution. There are also some blaring contradictions—the more serious being that, while Pareto expresses himself strongly in favour of a positive theory, the work abounds with normative statements. Also, no one has so far given a satisfactory explanation as to why he calls the second part ' applied economics' .

There are, of course, positive elements in the Cours. In it he already visualizes general equilibrium as the result of the interdependence of all the economic elements within the system. Consequently, he emphasizes complementarity and substitution between all these elements. As in the Manuel, the Cours contains many concepts and hypotheses which are never completely worked out. Among these one comes across his theories of rent and economic crises; and in the treatment of the latter he seems to foreshadow Schumpeter.

It is in the Cours that Pareto introduces the ' law' of income distribution. Though it is a pioneering example of economic investigation, it is also an apologia for the inequality of wealth. He attributes this inequality strangely enough to the varying capabilities of men in society. But in the Manuel he qualifies this statement by pointing out that inequality is due to ' other facts which are related to these qualities' (Chap. VII, sec. 13).

Manuel

This work consists of nine chapters: the first one deals with general principles; the second is largely an introduction to sociology; chapters three to six deal with general economic equilibrium. A study on population is reserved for chapter seven; the next chapter treats of capital, whilst the last chapter is devoted to ' concrete economic phenomena' (rent, savings, international trade and economic crises). The work closes with a mathematical appendix.

Schumpeter who, unlike Bousquet and others, thought little of the Cours, was strongly of the opinion that Pareto made the first step that was to take him up the ladder of success in the Sunto (which appeared in die Giornale in 1900); next came the publication of a Résumé of a course of lectures he delivered in Paris. But ' the highest elevation in Pareto's claim to immortality' was reached in the Manuel in 1909, particularly because of the mathematical appendix.

The Italian original called Manuale di economia politica was completed in 1904. When the French translation was being prepared (1906-7) Pareto revised it and added the mathematical appendix. He also made some corrections mostly concerning the style, but left untouched the substance of the original work.

By the time he wrote the Manuel much change had taken place in his mind. For one thing he became a lukewarm liberal and even accepted protection under certain conditions. He also manifested a sort of neutral attitude on most social questions.

The main theme of the Manuel is general equilibrium—a notion he applies to almost all sections of the work including the one dealing with sociology. But while the internal forces within the economic system, such as individual and group interests, receive a great deal of attention, the external forces (such as climate and race) which are amply discussed in the Cours, no longer find a place in the Manuel. Interests, on the contrary, play a secondary and unimportant role in his sociological works because, as we shall see in the chapter on methodology, sociology, according to Pareto, should be concerned mainly with the non-rational actions of men in society.

Other important contributions in the Manuel consist of pioneering statements in the field of welfare, his theories of utility and production and the theory of international trade. The chapter on concrete economic phenomena is also of interest because of the attempt Pareto makes to confront real situations with the theoretical model.

There seem to be two schools of thought with regard to the merits of the Manuel. Those who subscribe to Pareto's ideas about economics as a positive science share the views of Schumpeter and think highly of this work. On the other hand, others such as Pirou and those economists who accept the views of the ' second' School of Lausanne, approve of it with reservations and, in some respects, believe it marks a retrograde step.

A Note on the 'MarchéFinancier Italien' (1891-1899)

This is the second volume in the Oeuvres complètes de Vilfredo Pareto edited by Professor G. Busino of the University of Lausanne. This volume consists of a valuable collection of articles and other minor works which Pareto published during the period 1891-1899. These contributions should help the reader to understand the Cours better. The matters they deal with range from money and banking to the role of savings in economic growth. But they are also invaluable for the wealth of information they contain about die economic and social life of Italy at the end of the nineteenth century. These writings help the reader to get an insight into the nature and goals of die free trade movement as well as its weakness (e.g. me anti-protectionists were few and disorganized). They also contain a detailed account of the financial events tàiat took place in Italy during the period.

This collection tàirows much light on Pareto's economic thinking, particularly on the role of die banks in an expanding economy and the misuse of credit as a cause of business fluctuations.

PARETO's MAJOR CONTRIBUTIONS TO ECONOMICS

Pareto's main contributions to economic theory consist of a novel approach to utility dieory, a reformulation of general economic equilibrium dieory and the laying of die foundations of modern welfare economics. To these one must add his unique pioneering work in the field of income distribution.

Utility Theory

From the very start of his career as an economist, Pareto was worried about ' mis wretched utility' . He could not understand how it could ever be measured. He coined die word ophelimité from die Greek root ' ophelimos' with die purpose of departing completely from die traditional notion of utility. In die Cours, however, it was still a subjective quality of the individual consumer even Uiough he tried hard to give to ophelimity a meaning different from the one usually implied by utility. It was a convenient way of expressing die satisfaction one derived from die use of a commodity widiout the need of measuring its intensity. Thus, diough utility was ' utilitarian' in die Benthamite sense, ophelimity was not necessarily so.

This distinction is not perhaps substantial enough, but it is a sure indication of Pareto's intention of moving away from measurable utility. It was in die Manuel, however, tàiat Pareto abandoned Uiis concept when he made full use of EdgeworuYs indifference curves, uiough he reversed die process in the sense mat he regarded die indifference map as given, tiius discarding die need of measuring utility. This process had already been used by Irving Fisher, but Pareto used it more forcefully and turned it into a more efficient tool for his own purpose.

His reaction against die marginalist dieory which had dominated economic dieory since 1870 was directed mainly against a trend of thought which moved farmer away from production, as emphasized in Classical tiiought, to theories which to Pareto seemed too individualistic and gave excessive importance to consumption. Hence, in his quest to give more meaning to the theory of general equilibrium, he produced an analysis which he could apply not only to consumption but to other sectors, particularly to production, as well.

General Equilibrium Theory

There is no doubt that for his theory of general economic equilibrium Pareto owed much to Léon Walras, but he managed to refine it and bring it to a higher level of generalization. His analysis was simpler than that of Walras. By reducing all the opposite forces to the simple indices of tastes and obstacles he produced an analysis which was applicable not only to the study of economic equilibrium, but to other social equilibria as well. At first sight the analysis may appear too general to be conducive to meaningful results, but one must keep in mind that Pareto never meant to confine it only to the determination of economic equilibrium.

His method was aimed at generalizing Walras's theory and he succeeded in producing an analysis which could be applicable to the economic process not subject to an institutional constraint.

In spite of his efforts to transform the system and make it dynamic, Pareto's treatment of general economic equilibrium remained static. Sometimes he seemed to confuse comparative statics with dynamics and, in fact, the whole analysis was concerned with a succession of static states. Yet, in the Manuel one can discover various dynamic elements which are an essential part of the apparatus of economic models which appeared much later.

This failure on the part of Pareto was also largely the result of his conviction that social reality cannot be confined within the realms of economics alone. This point was made quite clear in the Cours and was emphasized in the Traité. In the Manuel he reiterated the conviction that economic theory alone could not take account of what he called the undulations of the system. Given his mind regarding the nature and role of sociology, it seems, then, that Pareto was inclined to think that economics without the help of sociology was incapable of taking into account sufficient dynamic elements to render it significant.

Pareto gave special importance to the theory of production in his system of general equilibrium and his treatment of the theory is superior to that of Walras. The indifference curve techniques which he applied to the problem of choice confronting the consumer in the theory of demand, he also applied to the same problem facing the producer. He was the first to use this approach. He also introduced variable co-efficients of production, thus making the theory more realistic, whereas Walras at first worked on the assumption that these coefficients were fixed.

In connection with his equilibrium analysis one should mention a curious attitude on the part of Pareto to mathematics. Not only was he apologetic whenever he felt the need to make use of them, such as when he introduced calculus to give more precision to his theories and analytical work, but he also expressed a strange conviction that the use of mathematics should be confined only to general equilibrium analysis. This was apparently his more mature opinion, for earlier in his correspondence with Pantaleoni he made the unconditional statement that ' sooner or later mathematics will be the basis of economics' . It seems that he took this stand at the time when he criticized Marshall for giving so much importance to partial equilibrium analysis. He found Marshall's use of mathematics as ' useless and harmful' , because, to Pareto's mind, ' only the need to solve this system of equations which expresses the interdependence of the phenomena justifies the use of mathematics' .

It is, of course, not easy to read Pareto's mind on this matter, but one could venture one or two suggestions. Either his prejudice against Marshall became so strong that he sought to deprive Marshallian theory of any scientific content, even to the extent of making him look foolish for using mathematics as a scientific garb to theories ' which add very little to our knowledge' . Or he genuinely believed that only in the case of general economic equilibrium analysis, on account of the system of equations involved, did one need mathematics. According to Pareto, the use of mathematics was being confused with the use of symbols. Of one thing, however, we may rest assured: to Pareto mathematics was only one of the ways of ensuring the progress of political economy, but not the only way of treating the science. He was not in favour of the exclusive use of any one method and considered discussions as to which method he used, as a sheer waste of time.

Welfare Economics

If all these contributions left a mark on subsequent economic thought, in the field of welfare, Pareto was the founder of modern welfare economics. So whilst in other fields he made unique contributions to a body of thought which already existed, in welfare economy he was definitely a pioneer.

According to Pareto, for a maximum welfare position to be reached, society has to act in such a way that the ophelimity of some could not be increased to the detriment of others. Only if all the members of the community gained, could we be sure that welfare was enhanced. This optimal solution presupposes some arguable assumptions: that there should be a simultaneous achievement of both the subjective optimum and a physical optimum, that the distribution of income is ideal, that a position of equilibrium under conditions of perfect equilibrium is not only possible but a most desirable one for society, and other assumptions which we shall discuss later. But the Pareto criterion has been found quite useful in judging whether a proposed change in a policy is an improvement or not. Even some important analytical results have been achieved with the use of this criterion. Of course, it has its limitations particularly since it does not apply in the case of a policy by which some could gain and others lose.

In this regard it is interesting to note that though Pareto intended to establish a neutral standard of welfare, it became essentially a matter of value judgments with ethical overtones. Yet his approach to the theory of general welfare is essentially different from that of Edgeworth, Sidgwick, Marshall and especially Pigou who constructed a utilitarian theory which derived its inspiration from Bentham. The same was done by Walras who was concerned with ' the most equitable distribution possible of social wealth among men in society' . Pareto, on the contrary, refused to discuss redistribution of wealth and was not at all concerned about maximum satisfaction. In this respect he managed to build a collective optimum on very strong grounds.

The Pareto Law

The other pioneering work by Pareto is his ' law' of income distribution, which he discovered empirically and which, more than any other of his achievements, enhanced his reputation. Pareto argued that above a certain level, the distribution of incomes was rigid and followed a definite pattern. This implied the existence of a natural economic law according to which inequality could never be reduced simply by tampering with the distribution of incomes, but rather by making production grow faster than population. At first when he discovered the ' law' Pareto concluded that it was valid only for those countries whose data he studied; later, however, he expressed the belief that it could be applied to all countries.

This unscientific generalization was partly motivated by the fact that Pareto was delighted to have found an answer to the socialist attack on the distribution of wealth. The only hope for the working class to attain a higher standard of living and get closer to the better-off classes lay in an overall increase in production.

Though Pareto's law was subjected to much criticism and was received with scepticism by quite a few; many others found out that income data supported it. Even today from time to time one notices renewed interest in it, and in the possibilities it offers. All agree that one definite merit of the law is that it focussed the attention on minimum incomes. However, irrespective of its merits, it will always remain a unique pioneering work of econometric investigation.