4. Economics in Lausanne: Vilfredo Pareto and the Lausanne School

For the intellectual biography of Pareto, see Mornati (2018a, b). A third volume is forthcoming.

In 1891, Pareto also agreed to write a French preface to a selection of extracts from Marx’s Das Kapital chosen by Paul Lafargue and published in 1893. In this preface, Pareto proposed a strong marginalist critique of Marx’s theory of value, often referred to together with Böhm-Bawerk’s critique.

These articles were translated (with editors’ notes) into English in 2007 under the title Considerations on the Fundamental Principles of Pure Political Economy, edited by Roberto Marchionatti and Fiorenzo Mornati.

These points are considered in Chipman (1976), Weber (2001), and Marchionatti and Mornati (2003).

Walras had considered only the maximum ophelimity of each individual. Nevertheless, without demonstration, he believed that free competition was a maximum for the community. In the Trattato di sociologia (§2129, note 1), Pareto wrote: “Failure to distinguish between the maximum of ophelimity for the community and the maximum of ophelimity of each individual in the community had led certain writers to regard my demonstrations of my theories concerning the maximum of ophelimity for the community as reasoning in a circle. As a matter of fact, in the case of free competition, the equations of economic equilibrium are obtained by positing the condition that each individual attains the maximum of ophelimity; so that if one were to infer from those equations that every individual achieves the maximum of ophelimity, one would obviously be reasoning in a circle. But if, instead, one asserts that the equilibrium determined by the equations has the peculiarity of corresponding to a point of equilibrium for the community…one is stating a theorem that has to demonstrated. This demonstration I gave first in my Cours and then in my Manuale”.

In “Il massimo di utilità dato dalla libera concorrenza” (The Maximum of Utility given by Free Competition, 1894), Pareto considers the effects of variations in production techniques on the collective economic welfare. First, they are determined under conditions of free competition. Second, Pareto proves the theorem that the coefficients of production determined by free competition have the identical value to those obtained by determining the coefficients with the conditions to produce the maximum of utility with the minimum of sacrifice.

The analogy with Fisher’s formulation in Mathematical Investigations is evident. As a matter of fact, Pareto’s position is analogous to that affirmed by Poincaré (1901, in Jaffé 1965), as Edgeworth (1915) recognized.

In his elaboration of the logical/non-logical taxonomy, Pareto was inspired by the classification of the French entomologist Jean-Henri Fabre (an “inimitable observer”, as Charles Darwin called him) and by the works of the French zoologist Edmond Perrier.