Vilfredo Pareto

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Vilfredo Pareto was an Italian economist, sociologist, and philosopher born in Paris in 1848. He started his education there until his family moved back to Italy where he continued his education at the Polytechnic Institute in Turin. There he studied mathematics and literature before graduating in 1869. After graduating, he worked as an engineer for a couple railroads. Despite being an active critic of the Italian government's economic policies and publishing work denouncing protectionism and militarism, he did not study economics until the age of forty-two. He was inspired by Pantaleoni's Pure Economics and Leon Walras's work, specifically, the theory of general economic equilibrium. After meeting Pareto, Walras was impressed and pleased with his understanding of his work and quickly became a mentor to him.

Pareto eventually took over Walras's work as the Chair of Economics at the University of Lausanne after he retired. There, he began his scientific career, publishing works such as the Cours d'economie politique and the Manuale di economic politica. One of the two concepts he was known for was the  Pareto Optimality Principle. This is the allocation of resources that is most efficient and in which it is impossible to make any one person better off without making someone else worse. The second concept was Pareto's Law of Income Distribution or the 80-20 Law. According to this, 20% of all people receive 80% of all income, and 20% of the top 20% receive 80% of that income and so on. He derived this from British data on income, but saw the same pattern in Prussia, Saxony, Paris, and some Italian cities. He did note that there were exceptions and many exceptions have been found.

Later in his life he shifted to sociology in response to his change in beliefs. He switched from a liberal approach with a belief in democracy, liberty, free trade, and humanitarianism to a more skeptical and pessimistic approach to how humans behave. He believed people did not act logically but liked to pretend they did. However this did not effect his work much, and he continued to work and teach until his death in 1923.

When assigned this alias, I did not recognize his name. However, after researching, I have definitely heard of and studied his work before in other Econ classes. After reading into his work more, I could see how some of the concepts he developed could be incorporated into this class about organizations.

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Comments

  1. Professor ArvanSeptember 8, 2017 at 7:27 AM

    You will get to see Pareto Optimality in the next Excel homework, where there is one worksheet on the Edgeworth box. It is an important concept to understand and to relate to other efficiency concepts that economists use.

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