Editing Vilfredo Pareto (section)

== Economic concepts ==
=== Pareto theory of maximum economics ===
Pareto turned his interest to economic matters, and he became an advocate of [[free trade]], finding himself in conflict with the Italian government. His writings reflected the ideas of [[Léon Walras]] that economics is essentially a mathematical and natural science.<ref>{{cite book |last1=Pareto |first1=Vilfredo |title=Cours d’économie politique professé à l’Université de Lausanne |volume=1 |publisher=F. Rouge |location=Lausanne |pages=iii |date=1896}}</ref> He tried to sketch economics in analogy to mechanics, explicitly linking pure (and applied) economics to pure (and applied) mechanics,<ref>{{cite book |last1=Pareto |first1=Vilfredo |date=1907 |title=Manuel d’économie politique |location=Paris |publisher=Giard & Brière |pages=147}}</ref> presenting a concordance table relating the two sciences.<ref>{{cite book|last1=Pareto |first1=Vilfredo |date=1897 |title=Cours d’économie politique professé à l’Université de Lausanne |volume=2|publisher=F. Rouge |location=Lausanne |pages=12–13 |url=https://archive.org/details/fp-0148-2/page/12/mode/2up}}</ref><ref>{{cite journal |last1=Glötzl |first1=Erhard |last2=Glötzl |first2=Florentin |last3=Richters |first3=Oliver |title=From constrained optimization to constrained dynamics: extending analogies between economics and mechanics |journal=Journal of Economic Interaction and Coordination |volume=14 |pages=623–642 |date=2019 |doi=10.1007/s11403-019-00252-7 |hdl=10419/171974 |hdl-access=free }}</ref><ref>{{cite book |last1=McLure |first1=Michael |last2=Samuels |first2=Warren J. |date=2001 |title=Pareto, economics and society the mechanical analogy |publisher=Routledge |location=London}}</ref> Pareto was a leader of the "[[Lausanne School]]" and represents the second generation of the [[Neoclassical Revolution]]. His "tastes-and-obstacles" approach to [[general equilibrium theory]] was resurrected during the great "Paretian Revival" of the 1930s and has influenced theoretical economics since.<ref>Cirillo, Renato (1978) ''The Economics of Vilfredo Pareto''</ref> In his ''Manual of Political Economy'' (1906) the focus is on equilibrium in terms of solutions to individual problems of "objectives and constraints". He used the indifference curve of Edgeworth (1881) extensively, for the theory of the consumer and, another great novelty, in his theory of the producer. He gave the first presentation of the trade-off box now known as the "Edgeworth-Bowley" box.<ref>Mclure, Michael (2001) [https://www.questia.com/read/102813057 ''Pareto, Economics and Society: The Mechanical Analogy''] {{Webarchive|url=https://web.archive.org/web/20120504090948/http://www.questia.com/read/102813057 |date=4 May 2012 }}.</ref>

Pareto was the first to realize that cardinal utility could be dispensed with, and economic equilibrium thought of in terms of ordinal utility,<ref name="Aspers">{{cite journal |last=Aspers |first=Patrik |title=Crossing the Boundary of Economics and Sociology: The Case of Vilfredo Pareto |journal=The American Journal of Economics and Sociology |date=April 2001 |volume=60 |issue=2 |pages=519–545 |jstor=3487932 |doi=10.1111/1536-7150.00073 |url=https://www.alexandria.unisg.ch/260702/1/01_Pareto_AJES.pdf |access-date=6 September 2020 |archive-date=5 November 2020 |archive-url=https://web.archive.org/web/20201105222435/https://www.alexandria.unisg.ch/260702/1/01_Pareto_AJES.pdf |url-status=dead}}</ref> that is, it was not necessary to know how much a person valued this or that, only that he preferred X of this to Y of that. Utility was a preference-ordering. With this, Pareto not only inaugurated modern microeconomics but he also attacked the alliance of economics and utilitarian philosophy, which calls for the greatest good for the greatest number; Pareto said ''good'' cannot be measured. He replaced it with the notion of Pareto-optimality, the idea that a system is enjoying maximum economic satisfaction when no one can be made better off without making someone else worse off. Pareto optimality is widely used in welfare economics and game theory. A standard theorem is that a perfectly competitive market creates distributions of wealth that are Pareto optimal.<ref>{{cite journal |doi=10.1080/00220485.1991.10844705 |jstor=1182422 |title=How Well Do We Know Pareto Optimality? |journal=The Journal of Economic Education |volume=22 |issue=2 |pages=172–178 |year=2014 |last1=Mathur |first1=Vijay K}}</ref>

=== Concepts ===
Some economic concepts still in use in the 21st century are based on Pareto’s work. The [[Pareto chart]] is a special type of [[histogram]], used to view the causes of a problem in order of severity from largest to smallest. It is a statistical tool that graphically demonstrates the Pareto principle or the 80–20 rule. The Pareto principle concerns the distribution of income, while the [[Pareto distribution]] is a [[probability distribution]] used, among other things, as a mathematical realization of Pareto's law, and [[Ophelimity]] is a measure of purely economic satisfaction. The [[Pareto index]] is a measure of the inequality of income distribution. Pareto argued that in all countries and times the distribution of income and wealth is highly skewed, with a few holding most of the wealth. He argued that all observed societies follow a regular logarithmic pattern:<math>\ N=A  x^m</math> where N is the number of people with wealth higher than x, and A and m are constants. Over the years, Pareto's law proved remarkably close to observed data, with economists typically finding it plausible according to the ''[[Encyclopædia Britannica]]''. The Pareto efficiency is generally not very discriminating while the concept of potential Pareto-efficiency, also known as Kaldor-Hicks efficiency, is more discriminating and is widely used in economics. A common criticism outside of economics is that it relies on subjective preferences.<ref>{{Cite web |last=Ingham |first=Sean |date=9 October 2024 |title=Pareto-optimality |url=https://www.britannica.com/money/Pareto-optimality |access-date=31 October 2024 |website=Encyclopedia Britannica}}</ref> According to ''[[Oxford Reference]]'', the Pareto principle can be controversial in [[welfare economics]] since its assumptions are empirically questionable, may embody value-judgements, and tend to favour the ''status quo''. As a result of its silence on the initial distribution of resources, most sociologists are also critical of Paretian welfare economics.<ref>{{Cite web |date=2024 |title=Pareto principle |url=https://www.oxfordreference.com/display/10.1093/oi/authority.20110803100306260 |access-date=31 October 2024 |website=Oxford Reference }}</ref>