Liberty Matters

Pareto’s Dilemma: The Allocation of Liberty between Rationality and Irrationality

Alberto pointed out many aspects of Vilfredo Pareto's intellectual biography in order to question whether the Italian social scientist belongs to the tradition of classical liberalism, albeit he has been recognized as a major figure in the tradition of political realism. Alberto's answer is that Pareto belonged to the classical-liberal worldview but not to the classical-liberal program.
I second Alberto's analysis, and I would suggest consideration of another aspect of Pareto's vision, which was only mentioned: the role of human irrationality in Pareto's thought and how it became central to his intellectual transition from economics to sociology, which has to be seen as a natural development of his philosophical vision.[4] As modern moralists have taught us, irrationality is linked with the power of persuasion, and persuasion can be fatal for individual freedom and for a free society as well.
Pareto as a Modern Moralist
Pareto has been always aware that individuals are not only rational (economic) agents, as described in his Cours d'Économie Politique (1896) and Manuale di Economia Politica (1906, English translation 2014); individuals are also ideological agents who use rationality not to discover the truth but to manipulate it. When constrained within social dynamics, individuals tend to act in a non-logical way by following non-logical actions because they are biased by subjective motives (residuals) such as sentiments, instincts, and so forth. Nevertheless, non-logical actions driven by non-logical causations might be extremely powerful: they give individuals the illusion of being able to rationalize ex-post (derivations) their choices.
Pareto belonged not only to the two traditions mentioned by Alberto (classical liberalism and political realism) but also to the tradition of modern moralists (Montaigne, Bayle, Mandeville, Bentham) who focused on the analysis of human passions and irrational motivations of human behavior. In his Les systèmes socialistes (1902-03) as well as in his Trattato di sociologia generale, Pareto described the dynamic between conscious and unconscious motivations of human action; he attacked the distinction between public and private utility; and he strongly underlined the relevance of the role of persuasion among political competitors when getting political power. These three elements directly came from the tradition of modern moralism, albeit Pareto went deeper in scrutinizing the nature of residuals.
Pareto grounded the sociological dimension of political power on the dynamics between residuals and derivations. His elite theory explained the role of elites in governing complex political systems: in a truly dynamic society, the most virtuous individuals would be involved in elites; but in actual societies, individuals who belong to elites are those able to adopt force and persuasion as well as to strategically use their wealth and family connections, which are often far from virtuous.
The Role of Persuasion in the Emergence of Socialism
In Les systèmes socialistes, Pareto explained the origin and the nature of political ideology. The ideology behind socialism was the best example of human irrationality covered by rationality: grounded on feelings and faith, it pretended to be the rational development of history by following the well-known dynamic à la Hegel-Marx. Hence, according to Pareto, socialism is the ideology of the irrationality of human action based on residuals and justified by derivations.
His book on socialism and its several forms (from utopian socialism to Marxism) became for Pareto a laboratory to test what would become the fundamental axiom of his Trattato di sociologia generale: "those who accept a proposition, too often accept it because it fits their feelings." (Pareto 1916, §78)
Pareto analyzed any form of ideology by considering its degree of persuasion and utility -- which led him to an inconvenient truth. On one side, a theory based on facts and logically described cannot be persuasive, and consequently, it is useless to describe social dynamics. On the other side, a non-logical theory based on irrational feelings and emotions can be very persuasive and useful to generate forms of social integration which seem to work in the short run, yet they are dangerous in the long run because they decrease economic development and erode individual liberty. Both socialism and fascism are good examples of this mechanism which combines rationality and irrationality: in fact, Pareto interpreted political theories as ex-post ways of rationalization and camouflage.
Pareto used his theory of residuals and derivations to explain the psychology behind social equilibrium in the political realm too. In his analysis, Pareto anticipated the critique of constructivism developed later by Mises and Hayek, but also the critique of holism and organicism later developed by Popper and Kelsen: any form of social engineering which is aimed at modifying the complexity of a social system is bound to fail.
The Transformation of Liberal-democratic Systems and the Rise of Fascism
The fundamental role of irrationality in humans as individuals as well as in social groups made Pareto skeptical about the success of liberal-democratic systems, which he thought were doomed to a fatal transformation as a consequence of human irrationalism. Before Mannheim, Pareto recognized the transformation of liberalism from utopia to ideology; and he used his narrative of the political and social transformation of liberal democracy to elucidate the emergence of embryonic fascism. Pareto, who rejected the theory of class struggle, adopted the theory of spoliation to explain the emergence of any governing group that seizes power either in legal or illegal ways. His theory of elites is the broader application of this mechanism to politics. Elites can vary in their compositions, but they are all oligarchic. Influenced by the emergence of the phenomenon of "trasformismo," which specifically involved members of the two major political parties in the Italian parliament,[5] Pareto introduced the notion of "bourgeois parliamentarism" as a form of degeneration of classical liberalism, which in Italy led to the rise of fascism.
Two articles by Pareto are useful to understand his attitude toward early fascism as a direct consequence of the degeneration of parliamentarism (Pareto 1966a; 1966b); they also show that his initial sympathy for early fascism has been overestimated and probably had been manipulated by the regime. The first article was written in January 1922 (before the March on Rome, which occurred on October 28, 1922); the second was written after the March on Rome. In these writings, Pareto clarified the common traits between socialism and fascism: the use of extra-legal force and the ambiguous use of the term liberty in a nationalistic sense (fascism) or in an international sense (socialism). He also claimed that the success of both fascism and socialism was linked with the failure and weakness of parliaments: while fascism is a consequence of a logical mistake about nationalist sentiments in sociological terms, socialism is a consequence of a logical mistake about international feelings in sociological terms.
Pareto passed away in 1923 without having found a solution to his lifetime dilemma: if democracy is a continuous experiment to approach a political optimum, which is not possible to reach in a stable form because of the combination of rationality and irrationality, as it has been expressed in the dynamics of residuals and derivations, where is the place of freedom?
[4.] Pareto's Trattato di sociologia generale (1916), translated into English as Mind and Society (1935), is an enlargement of traditional sociology to include both logical and non-logical actions. (Zafirowski and Levine 1997) It represented the final stage of Pareto's thought, as rightly underlined by some recent literature (Aspers 2001; Dalziel and Higgins 2006), against Parsons's interpretation -- endorsed by Schumpeter (1949) -- of a separation between economics and sociology in Pareto's reasoning.
[5.] Trasformismo was the practice adopted in the Italian parliament during the late 18th century by the two major antagonist parties: they converged in approving or rejecting laws in order to isolate minority parties, especially on the left-wing of parliament, such as socialists, radicals, and republicans.