Vilfredo Pareto: Contributions to Economics and Sociology - Term Paper Example

Vilfredo Pare Contributions to Economics and Sociology Introduction Vilfredo Pareto (1848-1923), was an Italian economist and sociologist. He was born in Paris to Raphael Pareto. His father was a follower of Mazzini who was in exile in France. His mother was French. In 1858, Pareto’s family returned to Italy after his father was granted amnesty.1 Pareto began school in France and on his family’s return to Italy he continued his schooling. He completed his formal schooling in engineering at the Polytechnic Institute in Turin at the age of 21. He worked as an engineer from 1870 to 1892 and was appointed a director of two Italian railways.2 His economist career began by chance when he met Pantaleoni. A study of Pantaleoni’s Pure Economics encouraged him to reread Walras. He had initially been indifferent to the works of Walras but on rereading he was impressed by the general economic equilibrium theory. He met Walras in 1891 at a time when he wanted to resign his professorship at Lausanne University. When Walras retired in 1893, Pareto succeeded him at the university.3 This was the beginning of his career as an economist and later a sociologist. Some of the great works by include: the Manuel, the Cours, the article “Economie mathematique” which were on economics, the Systemes socialistes and the Trattato which were primarily on sociology.4 Contributions to Economics Pareto’s work in economics covered several fundamental areas of economic thought. These include: the definition of economics as a science, the integration of economics into sociology, the definition theory of demand and index functions, the establishment the maximum efficiency theory, and the development of the law of income distribution. One of the greatest achievements by Pareto was his presentation of the basis of economics as a science.5 He enunciated scientific theories with a special focus on economic and sociological theories. The only source of knowledge for Pareto was through observation of facts. He used abstraction is his analysis of facts while theory provided a simplified image of reality used to preserve the essential features of facts. All of Pareto’s works, from the Cours to the Trattato, were studded with shrewd observations based on the philosophy of science, scientific methodology and the science of economics. These observations are dispersed throughout the various works by Pareto. Trattato contains the essential features of the philosophy of science as expressed by Pareto.6 Throughout his work, Pareto applied his philosophy of science to develop theories and relate theories to facts. He used this to clearly explain the relationship between the dynamic and the static. He showed that though the static is only a phase, it is a necessary phase of the dynamic.7 The study of facts and consequent development of theories to explain these facts was his dominant occupation. The arguments presented in the Cours are illustrated using many statistical and historical references. In the later stages of his work, Pareto shifted his interest from analyzing statistical data to the analysis of sociological and historical phenomena. Pareto also did a critical examination of many of pseudo-scientific theories. In the Systemes socialistes, he subjects the logical inconsistencies of socialist economic theories such as the Marxist theory to a rigorous analysis. This is an illustration of the critical aspect of his work which is fully expressed in the Trattato. Pareto integrated economic theory into the social sciences. His main goal was to generalize the theory of general economic equilibrium by Walras so that it covers all the social sciences.8 He used the interdependence of social and economic phenomena as a guiding principle for his work. He believed that economic theory was part of a greater whole whose study was necessary, though not sufficient, in order to understand society. Pareto was the first scholar to clearly distinguish between the concepts of ordinal and cardinal utility by designating terms and “index function” (fonction indice) and “total ophelimity” (ophelimite totale). He illustrated the economic equilibrium theory can be explained without reference to a cardinal utility index by using the index function (ordinal utility).9 Pareto developed a general demand theory which illustrated the theoretical derivation of the empirical laws of demand using material derived from introspective reasoning. The construction of the fundamentals for the theory of maximum efficiency in economic management was another important contribution to economic thought. This concept is also known as the optimum resource allocation concept. Pareto defined a scenario of maximum efficiency as one whereby it is not possible to increase the index function of one person without decreasing the index function of some other person.10 Pareto also developed the law of income distribution. Though much of Pareto’s work had little effect in the English-speaking world, several developments in theoretical economics are accredited to his works. His ideas have been drawn upon by several economists such as Hicks, Lange, Hotelling, Samuelson, Lerner, Koopmans, Arrow, Dorfman, among others.11 His influence in economics was diminished by the ideological impacts of his works. He vigorously attacked on democracy, criticized socialist systems and leaders who were. This caused him to fallout with left-wing intellectuals who generally chose to ignore his work. Pareto’s critical faculty, erudition and creative imagination in synthesis of theories were exceptional. He integrated economic phenomena into the social reality fabric, generalized Walras’s general economic equilibrium theory, and established a generalized theory of social life through the analysis of facts. All his specific analyses were excellent. A lot of progress has been made in the various fields opened up by Pareto. Together with Irving Fisher and Walras, Pareto can be regarded as being among the founders of modern economic science.12 The three share a common trait in that they were either hated or ignored by their compatriots but their works proved to be useful to future scholars. Contributions to Sociology Besides his contributions to mathematical economic theory, Pareto led other theorists of his generation in the development of sociology. The background of Pareto’s thoughts on sociology was influenced by two things. First, he was his studies in engineering and physical science for which he received his degree and practiced engineering for a long time.13 The second influence was his Latin-humanistic orientation. Pareto was steeped in the literature and history of both the Renaissance and the ancient world. He was fluent in French and Italian since he had lived in Paris as a child before moving to Italy at age ten, and later to French Switzerland. He did not know German and could speak only a bit of English.14 Pareto viewed the theoretical aspects of sociology as an extension of economic theories. In his view, economics dealt with a particular type of component that made up social action. He defined sociology as dealing with the components of action that are not handled by economics or other disciplines such as military strategy and technology and which are concerned with logical action.15 Using his definitions, he attempted to integrate the elements of economics and sociology into his conception of the total equilibrium and disturbances of the society as a social system. His major reference point when defining action was similar to that of the utilitarians and Max Weber. However, his was less directly determinate and more residual in its statement of problems. Pareto did not have an equivalent of definition of status of “ideal factors” problem inherited by Weber from the idealist and historicist tradition of German thoughts.16 He shared a kind of Cartesian background with most of his contemporaries and predecessors, particularly the utilitarians. Cartesian epistemology influenced his paradigm for empirical scientific analysis. However, this paradigm had two major complications in that the subject was conceived by Pareto knower and actor and secondly, the actor became the object of observation by the scientist. 17 Pareto used the concept of logical action to deal with social problems. He warned against assuming non-logical action necessarily meant illogical action. He divided the non-logical action into two categories. One category consisted of action determined by factors which are independent of their subjective aspects such as the drives, needs, and instincts of the being. The second category showed that he was not a mere reductionist: it concerned action based on cultural and normative factors. 18 Pareto used a special procedure to go beyond the starting point in his formulations. He confined himself in the analysis of theories associated with social behavior instead of subjecting its totality to a formal analysis. When it came to logical action, by definition he assumed that overt action corresponded to the theory behind it. For non-logical action he assumed the relationship to be directly problematical. Pareto handled his problems pragmatically. He treated theories as indices of the forces that determined social action in the same way a thermometer reading indicated the thermal state of the system it was linked with.19 Pareto viewed society as a system. He worked with a cross-classification approach to develop categories which he used to delineate the social system. This concept was derived from analytical mechanics and applied it elaborately in economics before finally using it in sociology. The equilibrium concept is central to this type of system analysis though Pareto was often misunderstood as holding a static concept of social phenomena. He defended himself from these allegations by distinguishing between dynamic, static and moving equilibriums. He used a natural science model in his works. The most notable statement on the relationship between logical and non-logical action and their relation to the social system was found in Pareto’s discussion of the social utility theory. He began with the doctrine of maximum satisfaction in economics and coined the term ophelimity to describe the economic aspect of satisfaction while using the term utility to describe satisfaction in the broader sociological aspect.20 He stated that ophelimity could only be treated in a distributive manner as the aggregate the satisfaction of individuals in the system. He then distinguished between two types of change: one which affects all actors in one direction and one that injures one group while improving the economic situation of the other group.21 The core theoretical interest by Pareto which was a vital contribution was to develop theories which surpass experience and relate these theories to residues rather than to the psychological factors that impinge on social organization. His discussion of the place of derivations, residues, and their relationship with other elements in the social system equilibrium was aimed at delineating this special interest. Pareto uses two of his six categories of residues the persistence of aggregates and the instinct of combinations in this discussion. He attempts to show how residues distribution in a population relates not only to intellectual life the belief systems, but also to the state of the economy and the polity.22 The residue of combinations impels men to making systems, that is, the elaboration of pseudo-logical combinations of ideas. These residues cause men to manipulate elements found in experience. They lead people practice large-scale financial manipulation. They make people combine, merge, and recombine enterprises. At more complex levels, they can explain why politicians and statesmen fuse and join political forces in making political deals and building political empires. The men that are primarily moved by this class of residues behave like Machiavelli's "foxes."23 They are capable of innovation, experimentation, and departure from common practice, but lack fidelity to uphold the principles and conservative virtues that can insure their stability. The second class of residues represents the conservative forces of social inertia. Such persons have powerful inclination of loyalty to tribe, family, city, and nation. They display patriotism, solidarity and religious zeal and are not afraid to use force when necessary. This group of people is referred to Machiavelli as "lions."24 The circulation of elites as analyzed by Pareto led to several empirical generalizations. In modern terms the analysis is an important rhythm in the change process of dynamic societies such as those of the West. It consisted of successive phases where leadership was in the hands of the adaptive-innovative and then transferred to conservative-regressive groups. Pareto’s writings on this issue reconsidered the many developments in social science from the early years when his ideas took shape. Pareto’s circulation of the elite gives little importance to the role played by mass movements throughout history.  Instead, this system, rooted in non-logical action, takes an immutable order.  It is founded on instincts that are changeless. According to Pareto, the conservative society is beyond the pale planned intervention or revolution. He believed that the vision of change was an illusion used to disguise the cycles of domination by the elite for a brief historical period.25 Conclusion Pareto’s economic and sociological methodology came from his ontological position and observations on the how objective and subjective approaches influenced action. This has produced a system that analyses human action on the basis of a dichotomy such that one part of the system assumes subjective and objectives actions to be independent of human action while the other part assumes interdependency between subjective and objective human action. Pareto was able to master varied disciplines and to progress the science in each discipline. Although he faced intellectual isolation, his influence on economics and sociology is identifiable. His way of reasoning is continually becoming relevant in solving current economic and social problems. He was a smart thinker and his work were a milestone in the history of thought. Bibliography Aspers, Patrik. “Crossing the Boundary of Economics and Sociology: The Case of Vilfredo Pareto.” American Journal of Economics and Sociology 60 (2001): 519-545. Print. Femia, Joseph. and Marshall, Alasdair. Vilfredo Pareto: Beyond Disciplinary Boundaries. London: Ashgate, 2012. Print. McLure, Michael. Economics in Relation to Sociology: Dualisms and Vilfredo Pareto’s Pluralistic Methodology. Crawley: University of Western Australia, 2005. Print. Nielsen, Francois. “Economic Inequality, Pareto, and Sociology: The Route Not Taken.” American Behavioral Scientist 50.5 (2007): 619-638. Web. 25 Apr. 2012. Pietri-Tonelli, A. de and Bousquet, G. H. Vilfredo Pareto: Neoclassical Synthesis of Economics and Sociology. London: Macmillan, 1994. Print. Swedberg, Richard. Economics and Sociology: Redefining Their Boundaries. New Jersey: Princeton University Press, 1990. Print. Wood, J. C. and McLure, M. (Eds.) Vilfredo Pareto: Critical Assessments of Leading Economists. London: Routledge, 1999. Print. Read More