J. S. Chipman (Guest Editor). Articles by Pareto in the Giornale degli Economisti, Special Issue of the Giornale degli Economisti e Annali di Economia, Anno 121 Vol. 67--N.3.
Article Type:
Periodical review
Periodicals (Periodical reviews)
McLure, Michael
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Name: History of Economics Review Publisher: History of Economic Thought Society of Australia Audience: Academic Format: Magazine/Journal Subject: Business, international; Economics Copyright: COPYRIGHT 2009 History of Economic Thought Society of Australia ISSN: 1037-0196
Date: Summer, 2009 Source Issue: 50
NamedWork: Giornale degli Economisti (Periodical)
Reviewee: Chipman, J.S.

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Full Text:
J. S. Chipman (Guest Editor). Articles by Pareto in the Giornale degli Economisti, Special Issue of the Giornale degli Economisti e Annali di Economia, Anno 121 Vol. 67--N.3. Milan: EGEA S.p.A. 2008. Pp. 273-565. 32 [euro] (Euro).

The most important and original ideas that Pareto contributed to scientific economics were first published in the Giornale degli Economisti, primarily between 1892 and 1902. These ideas generally re-emerged in the 1896-97 Cours d'Economie Politique, the 1906 Manuale di Economia Politica and the 1909 Manuel d'Economie Politique, but they were often expressed in a different mode: truncated, enhanced or integrated with other complicating ideas. Furthermore, while Pareto's Cours and Manuale-Manuel were written with student readers in mind, his articles in the Giornale were intended for fellow economists and had more immediate and frequent resort to mathematical formalism.

Over the years, some of Pareto's contributions to the Giornale have been translated into English and published. The most important examples of these are the open letters on methodology written by Pareto and Benedetto Croce in 1900 and 1901, which were included in International Economic Papers (No. 3, 1953); his seminal 1913 paper concerning the 'theory of social utility', which was included in Italian Economic Papers (No. 1, 1992); and his series of five articles on pure theory written in 1892 and 1893, which were recently published as the book, Considerations on the Fundamental Principles of Pure Political Economy (2007). However, publication of such translations from the Giornale degli Eonomisti has been infrequent and rare and, most importantly, Pareto's first contributions to choice theory and the economics of welfare--the two areas in economics where his contributions were of a most profound and enduring nature--remained untranslated. Consequently, to date, historians who did not read Italian were largely barred from serious investigation into the evolution of Pareto's ideas. The great merit of this special issue of the Giornale is that non-Italian readers are finally presented with English translations of Pareto's watershed studies on choice and economic welfare. It also provides historians with access to the Italian language debate between Edgeworth and Pareto on income distribution.

The translations included in this special issue of the Giornale were actually prepared in the early 1970s by John Cairncross, when a large Pareto translation project, sponsored by the American Economic Association, was established under the editorial direction of John Chipman. However, for a range of reasons the project was delayed and eventually lapsed. Thankfully it was revived after proprietorship of the translation was clarified and transferred from the AEA to Chipman in 2007--some 12 years after the translator's death. (1)

In regard to choice theory, this special issue includes the famous 1900 paper with the surprisingly general title 'Summary of some chapters of a new treatise on pure economics by Professor Pareto', which provided economic science with its first comprehensive discussion of, and formalisation of, economic equilibrium using ordinal utility based on direct observation of choice. A remarkable feature of the 'Sunto', as this article is now generally known, is the consistency with which the ordinal approach is presented. Nine years later, in his Manuel, Pareto again examined the ordinal and cardinal dimensions of utility theory, but it was undertaken in the context of other complexities, such as issues related to 'integrability' and the possibility of experimentally estimating marginal utility. The resulting loss of clarity, coupled with mathematical errors and increased general complexity, led some to argue that Pareto was inconsistent in the application of ordinal theory, if not confused. In contrast, the text of the 'Sunto' is simple, clear and eloquent and the mathematical formalism in the appendix to the article provides a near flawless representation of ordinal utility theory.

Welfare economics is dealt with in two classic papers: the 1894 'The maximum of utility given by free competition', which is Pareto's first study of the issue, and his 1902 'A new error in the interpretation of the theories of mathematical economics', which was written in response to criticism of Pareto's work dealing with what is now known as the first law of welfare economics.

The first of these studies introduces the Pareto criterion for welfare enhancement (at least someone must gain with no one being harmed) when presenting the first law of warfare economics, though the exposition is partial in that it was developed in the context of productive efficiency alone. But this limitation had a positive consequence--to make welfare comparisons it was necessary for Pareto to introduce the compensation criterion to welfare theoretics (predating Enrico Barone, J. R. Hicks and Nicolas Kaldor). He also went some way towards developing the second law of welfare economics to make the point that redistributive goals are more efficiently achieved through lump sure transfers rather than through an increase in workers' wage rates.

The second paper on welfare economics was written in response to Gaetano Scorza's critique of the proposition that equilibrium under free competition is an economic maximum. Scorza, a young mathematician, called that proposition nothing but 'gross sophistry'. In 'A new error' Pareto suggests that Scorza had rushed to conclusion without thinking the matter through. It is an historically important paper as it clarifies his earlier analysis and extends the analysis to include exchange. Also, even though the paper was written after Pareto's initiation of the ordinal approach to choice theory, his welfare analytics are presented in cardinal terms. This implies that Pareto was never a hard and fast 'ordinalist': he intended choice theory to explain the economic state of equilibrium as observed by the 'fact of choice', but when hypothetical non-equilibrium variations in commodity space were considered (such as when isolating welfare consequences of change), he saw no advantage in using a method based on the fact of choice. The paper also makes it clear that Pareto considered efficient outcomes in terres of a locus of points. This is relevant because it is sometimes observed that, although the Edgeworth box was first drawn by Pareto (not F. Y. Edgeworth) in the Manuale, he did not include a contract curve, and just one point of tangency is shown. However, when discussing the primitive precursor to the box diagram that emerged in 'A new error' (pp. 532-3), which shows indifference curves for two individuals in the same plane and with utility for both individuals referenced to the same origin (not diagonally opposite origins as in the Edgeworth box), he observes that: 'we thus have a locus which could be called the locus of maximum ophelimities [utilities], and, if the initial quantities possessed by the individual are given, and it comes to be settled that the exchange takes place at a constant price, free competition leads to equilibrium at a point on that locus' (Pareto, pp. 533-4).

The one clear shortcoming of this special issue of the Giornale is that it does not include the papers by Scorza. By only publishing the translation of Pareto's paper (with his final 'closing' comment appended), the full richness of the debate is not evident. Pareto summarily dismisses Scorza's views with the aid of sarcasm and casual references to fundamental errors. Scorza's critique certainly had faults, but he was not the fool that Pareto made him out to be as Scorza had a serious concern with the static treatment of dynamic economic phenomena when deriving welfare propositions, suggesting, among other things, that the inevitable lags between production and consumption decisions may lead to multiple equilibria with diverse welfare implications. Historians would, in my judgement, be interested in both sides of this polemic.

However, this shortcoming does not extend to the papers on income distribution as the section of the special issue headed 'Controversy between Pareto and Edgeworth' commences with Edgeworth's 'Supplementary notes on statistics'. This 1896 paper was actually published in the Journal of the Royal Statistical Society, but it has been wisely included because it sparked the debate between Pareto and Edgeworth that was published in the Giornale in late 1896 and early 1897. Pareto was initially concerned that the originality of his contribution had been called into question by Edgeworth, but his concern modified into something approaching resentment at misrepresentation (with the distribution considered outside the specified range) and frustration at Edgeworth's continual reference to complete probability distributions and to the work of Karl Pearson. Pareto did not mince words in his closing article when he provocatively paraphrased Edgeworth as saying to him that: 'there is someone studying the probability curve and, while all living things are involved in the supreme trial, you are not ashamed, you miserable pigmy, to devote your attention to the income curve? Be off with you, for you do nothing but indulge in "personal recrimination"' (Pareto p. 439). Further insight into this controversy is available from the current issue of the History of Economic Ideas (XVII/2009/1, pp. 180-6), which includes English translations of Pareto's two letters to Edgeworth on this issue from November 1896 (the second of which was written without greeting or salutation). (2) But while this controversy clearly marks an unpleasant break in the relationship between Pareto and Edgeworth, it did not poison their long term regard for each other's scientific contributions (with Pareto subsequently emphasising the importance of Edgeworth's Mathematical Psychics and Edgeworth pointing to the importance of Pareto's body of work in Palgrave's Dictionary of Political Economy).

In addition to classic studies on the economics of choice and welfare and the empirical laws of distribution, this special issue also includes a range of other important articles from the Giornale. These cover topics like the interpretive error in Augustin Cournot's political economy of trade, locational economics in the context of the benefit from railways, the approach to price theory of Rudolf Auspitz and Richard Lieben, international trade theory in a general equilibrium context, the relationship between infant mortality and the cost of producing an adult, and some preliminary equations on dynamic equilibrium. None of the translated articles on these topics have been published elsewhere and all provide insight into the development of Pareto's ideas. The final article 'Experimental Economics' is the only translation that has been previously published. It has been included because it is Pareto's final article published in the Giornale, written in 1918 after he had completed his major contributions to theoretical sociology and economics. In short, it is a reflective piece on the place of economics within the social sciences that so appropriately closes this special issue of the Giornale.

The final noteworthy feature of the issue is the contribution of the editor, John Chipman. In the 1970s, when Chipman had commenced his Pareto project for the AEA, he started writing an editorial introduction for a two-volume set: the first volume comprising all Pareto's scientific papers from the Giornale degli Economisti; and the second volume a variorum edition of the Italian Manuale and French Manuel. When that project stalled, Chipman published his introduction as a very long stand-alone article entitled 'The Paretian Heritage' in the Revue Europeene des Sciences Sociales (1976, no. 37, pp. 65-173). That article is now a classic--a point of reference in nearly all studies on Pareto's economics. However, it has not escaped criticism in relation to the Pareto-Scorza polemic. In the introduction to this special issue of the Giornale, that polemic is reconsidered in a balanced and insightful way. The other main editorial highlight is the contextual and historical overview provided by Chipman in his discussion of Pareto's 'On the Benefit which Railways Provide for the Country', placing that study in the context of contributions by Luigi Bodio, Emil Sax and Wilhelm Launhardt.

As such, this special issue of the Giornale is of great value to historians, primarily for the translations of so many papers of fundamental importance to the history of economic thought, but also for its useful editorial introduction.


(1.) As a curious aside, the BBC ('The Cambridge Spy Ring', Monday 13 September 1999) lists the translator, John Cairncross, as the fifth member of the well-known Cambridge spy ring (Kim Philby, Guy Burgess, Donald McLean, Anthony Blunt and Cairncross). Cairncross admitted to 'carelessness with official papers' after MI5 discovered a compromising memorandum in Burgess's flat in 1951: he was then required to resign from the civil service and he moved to Rome where he made a living as the Italian correspondent for the Economist and other international media outlets (Richard Davenport-Hines, 2004. 'Cairncross, John (1913-1995)', Oxford Dictionary of National Biography) as well as translating economic papers (Rob Bell, 'Potpourri' http://potpourri-variety.blogspot.com/2009/07/ john-carincross-battle-of-kursk.html.).

(2.) The same issue of the History of Economic Ideas also includes translations of: (i) Pareto's 1896 University of Lausanne paper on 'The Curve of the Distribution of Wealth' which built on an earlier Giornale degli Economisti article on demand to introduce his empirical law of income distribution; and (ii) Pareto's 1902 German Encyclopaedia article 'The Application of Mathematics to Political Economy', which built on the 1900 'Sunto' by also dispensing with the cardinal measurement of utility.

Michael McLure, Business School, Economics Program, University of Western Australia, 35 Stirling Highway, Crawley WA 6009, Australia. Email: Miehael.McLure@uwa.edu.au.
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