Vilfredo Pareto

You've mentioned my final boss, Kyle.

When I die and I have to go to the Egyptian god of death to fight for my place in the afterlife, the guy that I'm going to be faced with is Vilfredo Pareto.

Anyways.

Yeah.

These battles were supposedly waged between reactionary and democratic liberals.

Those liberals who were just and humanitarian, it has been argued, went with changing times, while others who were not, such as the Franco-Italian economist and socialist Vilfredo Pareto, fell into bad company and even sometimes into fascism.

Implicit in such a view is the distinction that more and more modern liberals have drawn throughout the 20th century between themselves and those they have replaced.

It is a purely strategic stance that minimizes the reality of past conflicts.

And that's why it's especially bad here.

Unlike today's liberals, traditional ones entertain deep reservations about popular rule.

A belief that democracy leads inevitably to socialism was common to French liberals of the 1830s and 1840s, and it is equally apparent to Leakey, Pareto, Weber, and other liberal observers at the end of the century.

Pareto and Leakey feared that democracy would bring forth a trade union approach to economic policy.

I wish I could take credit for it.

Uh, Vilfredo Pareto, uh, gets the credit for it.

Um, Oh, Cindy, I could go on and on.

You're going to have to point me.

I mean, from a work, for being awesome at your job, give them a little bit of what you mean by how you would apply the 80-20 rule.

Yeah, well, so quick recap.

Vilfredo Pareto is an Italian economist who, legend has it, noticed that 80% of the peas were being grown on 20% of the pea plants in his garden.

He said, this is an interesting relationship.

For one thing, elite theory had pan-ideological appeal.

It claimed economic anti-statists, Vilfredo Pareto, and anti-oligarchic socialists, Robert Michels, alike, as well as conservative jurists like Gaetano Mosca and Vienna-trained economists like Joseph Schumpeter, progressive liberals like Dahl, and outright left-wing radicals like C. Wright Mills.

From their own ideological standpoints, each became reconciled to the idea that some elite presence would always play a role in politics.

The more conservative theorists rationalized elite rule by insisting that the tendency of wealth and power to concentrate in a few hands was natural and ineradicable.

Radicals like Mills instead pointed to a coordinated power elite, more on this below, as proof that a convergence at the top, the phenomenon of elites working together, wasn't something that would go away.

It would also be a mistake to understand elite theorists as somehow defending the status quo, as Droshan puts it.

In reality, all three, Mosca, Pareto, and Mikkels, were highly critical of the elites of their day.

Mosca heaped contempt on Mussolini in one of his final political acts, claiming that for all the faults of Italian parliamentary democracy, it was better than fascist thuggery.

And for me, that's been a better approach.

If you can imagine two concentric circles and there's an overlap in the middle, on the one side, you've heard of Wilfredo Pareto's 80-20 principle.

I'm sure the idea that 80% of your activities generate 20% of the value for your business and 20% of your energy and activities are probably generating 80% of your income and value.

And that's certainly true on our farm.

There are t- really only a handful of things that lead to the outcomes that we want in our lives.

Vilfredo Pareto, the, uh, founder of the Pareto Principle, the 80/20 rule, was an Italian gardener and an economist, and he was sitting in his garden one day and he realized that, "Wow, 80% of my peas come from 20% of my pea pods." And he looked around at the Italian economy and he thought, "Wow, 80% of the land in Italy is owned by 20% of the people." And he became curious, he was a researcher, and his rule now, called the Pareto Principle, the 80/20 rule, has been applied across a wide spectrum of the world.

And he suggests that 20% of our efforts, 20% of our energy, 20% of our time, leads to 80% of our outcomes.

Wow.

And I'm very happy to have you on the show as a former colleague at the Centre Valos Pareto in Lausanne.

The first paper we'll discuss about is the one that you wrote with Michele Bay and that was published in the Journal of Economics out in 2023, The Birth of Homo Economicus, The Methodological Debate on the Economic Agent from John Stuart Mill to Vilfredo Pareto.

And so my first question to you would be, on that paper, what is the common understanding of Homo economicus today? Is it closer to John Stuart Mill's wealth-seeking individual or to Maffeo Pantaleoni's evolutionary agent, as you tell in your paper, or even to Vilfredo Pareto's choice machine? And perhaps the question behind that is what common misconceptions about Homo economicus were you hoping to challenge with your article?

Okay, this is a great question, Francois.

I guess the first one is easier and quicker for me to respond.

I really believe in some form of human rationality.

And I think secondly, and perhaps more importantly for our paper, is that Taller misreads what the homo economicus or the economic man is about when he says that it's not a realistic description, because if he In a way, read our paper, he would realize that this was not the intention of John Stuart Mill, who really proposed this conception of an abstract human being or an abstract version of an economic agent.

that is not supposed to be a realistic description and and it's the same with vilfredo pareto they emphasize that this is for the purpose of building pure economics or for building a scientific economics it's not meant to describe how actual human beings living in a society with complex forms of social interaction for that we need more than just the economic man

Essentially, you find time and time again that things have this normal distribution, and it can make us start to believe that everything in our world follows a normal distribution.

And this is what human civilization thought was the case with really every part of human life for millennia, until Vilfredo Pareto

In the late 1800s, Italian engineer Vilfredo Pareto stumbled upon something no one had seen before.

See, he suspected there might be a hidden pattern in how much money people make, so he gathered income tax records from Italy, England, France, and other European countries, and for each country, he plotted the distribution of income.

Each country he looked at, he saw the same pattern, a pattern which still holds in most countries to this day, and it's not a normal distribution

People's wages don't cluster around an average.

They exponentially increase for some workers.

Pareto saw that the majority of people made, back in the 1800s, say 100 pounds.