March 28, 2011

Vilfredo Pareto

Vilfredo Pareto

Pareto’s best-known student was Mussolini while he was in Swiss exile as a Marxist agitator. (Yes, Mussolini used to be a Marxist.) Pareto was such an influence on the future Il Duce, Mussolini made him a Senator of Rome when he came to power. Pareto, ever the independent-minded sourpuss, denounced Mussolini’s censorship of the university system anyway. Much ink has been spent defending Pareto from the charge of being a fascist. Whatever his feelings toward Mussolini’s big ideas, Pareto had the good graces to drop dead in 1923, long before the fascists got up to much mischief. At the time, plenty of respectable men were Mussolini fans. Such modern demigods as Winston Churchill and FDR were singing Mussolini’s praises well into the 1930s. Anyone in the 21st century who dismisses Pareto on the grounds that he might have very briefly been a Mussolini fan is a tittering ninny who should be laughed to scorn”€”especially if he thinks FDR and Churchill were good guys.

Once he turned elitist, Pareto changed his lifestyle completely, surrounding himself with art and Angora cats in a Swiss villa where he devoted himself to beauty, pleasure, mathematics, and the destruction of the liberal ideology he had supported so vociferously in previous years. He had one of the greatest collections of wine and liqueur in Europe and lived the lifestyle of a highborn aesthete. After D’Annunzio’s triumphant march on Fiume, Pareto became a Fiuman citizen.

As for his art, Pareto realized something that economists still haven’t fully absorbed: “€œUtility””€”the way people value things”€”is irrational and discontinuous and only appears otherwise when many people’s utility functions are added together. Economists still teach otherwise, despite the obvious observation that individual utility functions look like steps rather than funky-smooth exponential thingies. To give a pedestrian example, my “utility function” for a can of peas might be a dollar, but my utility function for a truckload of cans of peas is basically zero. What would I do with a truckload of canned peas? I’m a scientist, not a pea salesman. Modern economists insist that I become an autistic utility-optimizing economic ding-dong who would value the truckload of canned peas as much as a grocer would. Pareto knew that sort of thinking was bonkers. People are not utility-optimizing, hyper-rational autistic robots: only economists are. Pareto’s idea that people are not completely rational is now a bleeding-edge research field known as “behavioral economics.” Ultimately, this “new” field of economic research consists of mere footnotes to one of Pareto’s essays.

Pareto also noticed how income and property were distributed inequitably and realized this distribution had the force of natural law for ability as well as economic distribution of wealth. This idea is useful in all kinds of other fields. The same distributions which govern wealth and ability are found in all sorts of natural and artificial structures, and it is a field of intense research today, as Pareto’s ideas are discovered by new generations of scientists. His ideas about power-law distributions pervade some of the most interesting areas of research in physics, statistics, and network theory today.

Above, far above the prejudices and passions of men soar the laws of nature. Eternal and immutable, they are the expression of the creative power they represent what is, what must be, what otherwise could not be. Man can come to understand them: he is incapable of changing them.

Pareto’s ideas eventually inspired much of Benoit Mandelbrot’s work on fractal geometry as applied to economics. In addition to sharing his views on socialism and Gabriele D”€™Annunzio’s general awesomeness, I have ended up devoting a significant fraction of my creative energies to mathematical ideas which Pareto pioneered. He was brilliant, bad-assed, bloody-minded, and a connoisseur of both crazy ladies and fine wines: How could you not want such a man at your historical dinner party?



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