Vilfredo Federigo Damasio Pareto (1848-1923) - Italian sociologist and economist, great Lausanne's school representative and Leon Walras's student. In his works, he accented intensity of economy connections with sociology and economic policy. Taking into consideration defects coming from free competition, he modified Walras's general balance theory. In the field of economics, it is well known so-called "Pareto Optimum", which explains allocation of the resources of a society.
Vilfredo Pareto was born on 15 July 1848 in Paris, as a child of Italian, aristocratic family. He studied mathematics and physics at the Polytechnic Institute in Turin. After getting the title of engineer, he was employed by a large ironworks and also worked as a director of an Italian railway. In later years Vilfredo studied Walras's works. In 1893 Walras appointed him as his successor to the cathedral of the political economy at the University of Lausanne, although Pareto didn't have the academic experience. Pareto died on 19 August 1923 at the age of 75 years.
Influence on science
As part of the choice theory Vilfredo introduces a new approach to measuring the subjective categories such as the utility or the satisfaction. Using new concepts like: taste, obstacles, indifference curves, he helps us to understand the system of preferences and restrictions connecting with the choice. Indifference curves are image of consumer and producer behavior in a situation when he/she has to choose between two goods * they are very important element in the microeconomic theory.
Pareto divided utilities into:
- Cardinal utility (determination of how many times something is bigger than the standard value)
- Ordinal utility (indicators to assess bigger/smaller)
Pareto Optimum means the distribution of the available goods, which can't improve the situation of the subject without getting worse the situation of the other subjects.
In spite of mathematical talent, Vilfredo Pareto had also an extensive knowledge in the field of sociology and history. In addition to economy he gained the recognition of creating theories such as:
- 80-20 rule: 20% of objects linked with 80% of some resources.
- The Elite Circulation Theory: intensive exchange of social elite positions from opposition and coalition.
Author: Anna Pulchny