Many political disputes in recent years have been framed as battles between economic rationality and eruptions of irrationality that we label populism. But cognitive psychologists and economists would point out that political irrationality is hardly confined to populist insurgents. As a general matter, most political leaders are focused on practical matters and do not necessarily think deeply about the ideas they expound.
Among the early modern cartographers of political irrationality was Vilfredo Pareto, who died one hundred years ago, on August 19, 1923. Born in 1848, that year of liberal hope (and revolution) across Europe, Pareto died after witnessing the liberal order’s demise and the tragedy of World War I. Nowadays, his name pops up most often in references to “Pareto optimality” (when no further action can be taken to benefit someone without harming someone else) or the “Pareto principle” (the idea that around 80% of outcomes stem from only 20% of causes).
It is hard to imagine Pareto betting that he would be remembered for these ideas. His father, an engineer, had bequeathed him a scientific and mathematical education, and he had applied that to a managerial career that kept him busy into his 40s.
While still in business, he involved himself in liberal politics in Florence, where he became a pugnacious polemicist and learned economist. Eager for his voice to be heard, he corresponded with French economists and published in their language, always taking pains to develop contacts wherever he could. He wrote to Britain’s Liberal prime minister, William Gladstone, and Gladstone wrote back.
Among his many correspondents, the most frequent was Maffeo Pantaleoni, a career academic ten years his junior but far more accomplished when the two of them started to exchange letters. Pareto expressed appreciation for an essay by Pantaleoni, but he had spotted a few flaws in it. Instead of reacting grudgingly, Pantaleoni quickly discerned that his pen pal was a genius. He duly kept all his letters and was instrumental in Pareto’s move to academia. In 1893, Pareto succeeded Léon Walras, a founder of neoclassical economics, in his chair at the University of Lausanne.
There, Pareto embraced teaching vigorously, but his enthusiasm for economics faded. He wanted to move to sociology, because he had come to see human life as dominated by illogical actions. Having already played a considerable role in formalizing modern economics, he would soon also end up at the fountainhead of twentieth-century political science and sociology.
As a young man, Pareto saw free trade as obviously beneficial to all, and military spending as detrimental to many. Yet his own country, Italy, moved away from free trade and embarked on extravagant, brutal colonial expansions. While Pareto was quick to diagnose this behavior as the result of influence by special interests, he wondered why so many other people went along with it.
The function of political ideologies, as Pareto saw it, was to put lipstick on a pig. The fundamental nature of politics is that somebody rules and many more obey – and not even democracy can change that.
But the fact that somebody must rule does not mean that the same people rule forever. On the contrary, history is a cemetery of defunct ruling classes. When a ruling class becomes too self-referential and incapable of integrating new elements, its time is up.
Pareto did not think history and politics could be understood from the self-serving narratives of the protagonists. Rather, developments should be subjected to a scientific inquiry that goes beyond the surface of “derivations,” not stopping at the reasons people provide to explain their own behavior. Pareto understood that people’s actions stem from deep-rooted motives – what he called “residues” – which they then must rationalize. We are all constantly inventing justifications to make the non-rational appear rational.
Pareto saw “rationalism” as just another “intellectual religion,” and intellectuals as no less susceptible to pseudo-scientific creeds than anybody else. The next time you scroll through your social-media feed, consider whether all those advocating “right” causes have actually thought deeply about them. How many have actually read all the literature they cite, or engaged with opposing views? Often, what we think is contingent on our need to belong.
In politics, two “residues” (triggers of action) are of paramount importance. On the one hand, there are “rentiers” who value stability, oppose change and newcomers, and tend to live on land rent or fixed income. Pareto characterizes their “residue” as the “persistence of aggregates” – such as customs, traditions, social classes, and so forth.
On the other hand, there are “speculators” who thrive on change and the pursuit of innovation, but who also tend to manipulate government for their own ends. Pareto describes their “residue” as the “instinct for combination,” which suggests an ability to invent ever-new things.
Both rentiers and speculators are necessary for a country to thrive, but Pareto saw the second category as more likely to gain control of society, particularly when government is expanding. They are at home in large-scale, ambitious “schemes” – regardless of whether the aim is to win a war, reduce inequality, or make bureaucracy more efficient.
Pareto’s sketches of the world before WWI resemble the world we live in now. He saw financial engineering at the service of government as basically fraudulent; he ridiculed those who believed that taxes were a fee we pay for services; and he regarded inflation and public debt as instruments for “plundering” specific segments of the population.
In the long run, governments do not pay their debts, and they will tax people as much as they can. Speculators are better at surfing the wave and profiting from these tendencies, whereas rentiers (or pensioners and others on fixed incomes) are more likely to end up paying the bill.
Today more than ever, politics is about believing and belonging. Polarization has made the right and the left into ardent champions of their respective causes. Both believe that if they don’t win, the world will go to the dogs. Public intellectuals today are fully invested in this rhetoric.
Of course, Pareto himself was a man of passions, who ardently believed in liberty and tolerance. Yet he somehow forced his political realism on himself, not in the service of some fetish for neutrality, but because he saw lucidity as his ultimate duty.
Project Syndicate
