GERRIT GORTER
The present study of economics did not, of course, come out of thin air. Although thinkers in classical Greece already reflected on what we now call economics, it was largely in the eighteenth century that systematic thought on the subject began.
Two conceptual tools—the economic cycle and the idea of the invisible hand—date from that century and are still in use today, both in academic research and in education.
This site contains twenty-five portraits of important economists. Each offers a biographical sketch together with an indication of his (and, in one case, her) significance for the development of economic thought. They claim no more than to provide a first introduction to the lives and works of these pioneers.
These articles originally appeared in Dutch in the Tijdschrift voor het Economisch Onderwijs and were published on the website of Gerrit Gorter. The English translations are by Folkert Gorter.
Index
François Quesnay
Adam Smith
Thomas Robert Malthus
Jean-Baptiste Say
David Ricardo
Antoine Augustin Cournot
John Stuart Mill
Karl Marx
Walras
Carl Menger
Alfred Marshall
Vilfredo Pareto Eugen von Böhm-Bawerk
Knut Wicksell
Max Weber
Irving Fisher
Sam de Wolff
John Maynard Keynes
Joseph Alois Schumpeter
Joan Robinson
Jan Tinbergen
John Hicks
John Kenneth Galbraith
Milton Friedman
Paul Samuelson
Vilfredo Pareto
France 1848–1923
Vilfredo Pareto was born in Paris in 1848. He was the son of an Italian father, who lived in exile due to his critical stance, and a French mother. Ten years after Pareto’s birth, the family returned to Italy. Pareto graduated as an engineer and went to work for the railways, a job he held for more than twenty years. In 1892, after what we would now call a career switch, he appears in Lausanne, Switzerland, succeeding Léon Walras as professor of economics. This, of course, had been preceded by a thorough (self-directed) education. Fascinated by the success of the British laissez-faire economy, Pareto joined the Adam Smith Society and was an active member throughout the 1870s and 1880s, during which he published regularly.
In 1889, he married a moderately well-off Russian countess — who, however, left him for a young servant. Fortunately, that same year he inherited a fortune from an uncle, with which he bought a villa on Lake Geneva. By then, the countess had been replaced by a youthful Frenchwoman.
Pareto’s name still appears in contemporary economics textbooks. Best known is probably the Pareto optimum: a situation that is, in a sense, optima. Given the resources available to a society, a Pareto optimum is a distribution such that any reallocation would make someone worse off. A capitalist society under conditions of perfect competition would, on its own, give rise to such an optimum — a view entirely in keeping with his admiration for Adam Smith. The problem with the Pareto optimum, however, is that there is a whole range (in principle, an infinite number) of optima. If one starts from a particular income distribution and then starts redistributing, one will eventually arrive at a Pareto optimum. But someone starting from a different distribution will end up at a different one.
Pareto also studied income distribution. He examined the distribution in several countries and concluded that as income increases, the disparities grow relatively larger as well. In other words, if you’re rich, you’re very rich. His research resulted in the so-called 80/20 rule: 80 percent of households lived on just 20 percent of national income. This 80/20 rule, often referred to as the Pareto Principle, has since been applied to just about every imaginable subject. You’re said to wear only 20 percent of your wardrobe 80 percent of the time, 20 percent of customers account for 80 percent of sales, and so on.
Pareto was among those who developed an interest in economics coming from the exact sciences. Our own Jan Tinbergen started out as a physicist, as did John Maynard Keynes, while Alfred Marshall and Paul Samuelson were trained as mathematicians. As you can see, Pareto is in good company. It’s no surprise, then, that Pareto was a proponent of using mathematical techniques in economics. Modern economists — not infrequently quasi-mathematicians themselves — are fond of recalling this version of Pareto.
All the more interesting, then, is the fact that Pareto later in life said farewell to the mathematical approach to economic problems. He now leaned toward the view that economics should not be studied in isolation, but always placed in its historical and social context. Anyone opening a sociology textbook will encounter Pareto there as well, where he is likewise regarded as one of the major figures in the field. Among other things, he developed an important theory of social elites.
After retiring in 1911, he withdrew, with a large number of cats, to his villa on Lake Geneva. He was generally regarded as something of a reclusive eccentric — but not so eccentric that he turned down Mussolini’s offer to take a seat in the Italian Senate. He died in 1923.