Vilfredo Pareto and the Classical Theory of Elites

Vilfredo Pareto was a prominent social thinker best known for his Classical Elite Theory. He argued that society is always governed by a small minority of elites.

Pareto also criticized modern democratic political systems, arguing that they neither guarantee an equal distribution of wealth nor create a genuinely egalitarian society.

Marshall (2007) explains Pareto’s view as follows:

"Democratic political systems fail to adequately reflect the will of the people. Democratic elections merely function as a mechanism through which more capable new individuals are recruited into the political and economic elite. Pareto therefore believed that the expansion of universal suffrage in European democracies could actually contribute to increasing inequalities in wealth." (Marshall, 2007, p. 10)

The Pareto Principle (80/20 Rule)

This perspective is also related to what is now widely known as the Pareto Principle, or the 80/20 Rule.

The Pareto Principle refers to the empirical observation that approximately 80 percent of outcomes are often generated by 20 percent of causes.

In other words, the real world tends to be characterized by situations in which a relatively small minority—an elite—exercises disproportionate influence over, and often dominates, the majority of the population.

This perspective reflected the social and economic conditions that Pareto observed in Italy.

Pareto observed that approximately 80 percent of the land in Italy was owned by about 20 percent of the population.

Marshall further explains:

"Pareto sought to provide a clearer explanation of the psychological characteristics of the “exploiters” or “spoliators” who constituted the elite, as well as those of the “exploited” or “spoliated” who constituted the non-elite." (Marshall, 2007, p. 10)

Criticism of Democracy

Pareto was highly critical of phenomena such as plutocracy and demagoguery that emerged within democratic politics.

Rather, Pareto believed that society should be led by capable political elites.

For Pareto, social inequality was an inevitable feature of modern society.

In other words, he regarded social inequality not as a problem that could be completely eliminated, but as a phenomenon that naturally emerged within society.

Marshall explains this point as follows:

"Pareto appeared to provide empirical evidence that talent was naturally distributed unequally among individuals. For this reason, his theory was sometimes criticized for providing the conservative right with an intellectual weapon for justifying natural inequality." (Marshall, 2007, p. 2)

Similarities with Machiavelli

For this reason, Pareto shared many similarities with Machiavelli in his view of human nature and political society.

Marshall explains:

"Pareto accepted Machiavelli’s fundamental premise that the acquisition of social power was one of the central concerns of politics." (Marshall, 2007, p. 10)

Both thinkers therefore adopted a considerably pessimistic view of society and human behavior.

Their pessimism, however, was not simply a matter of personal disposition. It also reflected the historical circumstances in which they lived.

Machiavelli lived during the Renaissance, while Pareto witnessed the rapid social transformations that followed the Industrial Revolution.

These dramatic changes in the structure of power contributed to the breakdown of traditional social orders, political instability, and growing ideological uncertainty.

Individuals also experienced psychological insecurity concerning their identities and their place within a rapidly changing society.

Under these historical circumstances, Pareto’s and Machiavelli’s realistic and pessimistic views of society attracted considerable attention.

Marshall explains:

"The political and economic realities of Italy at the time help explain why Pareto arrived at such pessimistic conclusions." (Marshall, 2007, p. 10)

Economic Cycle Theory

Pareto also developed a theory concerning economic cycles.

Through the concepts of Pareto Improvement and Pareto Efficiency, he argued that, when a market economy functions properly, it can move toward an equilibrium in which economic welfare can be improved without making others worse off.

In other words, even if the initial conditions are inefficient and unequal, the operation of the market economy may gradually improve the allocation of resources and increase overall social welfare.

However, Pareto also believed that psychological factors played an important role in economic cycles.

Marshall explains that Pareto viewed the psychological characteristics of elites as important factors that could either stimulate or restrain consumption. He also believed that the psychological composition of economic elites played a significant role in determining whether capital flowed into long-term, low-risk industries or into short-term, high-risk consumption-oriented industries.

Criticism of Centralization

With regard to the structure of power, Pareto did not favor highly centralized authority or large centralized organizations.

He regarded centralized organizations that depended heavily on patronage and largesse as highly inefficient.

Marshall explains:

"The expansion of patronage systems weakens the work ethic and encourages hedonism. As increasing numbers of firms are protected from competition through patronage, they are able to sell lower-quality products at higher prices." (Marshall, 2007, p. 29)

Decentralization and the Market Economy

In contrast, Pareto believed that economic prosperity, efficient markets, and free competition were more likely to flourish in decentralized organizations and individualistic societies.

Marshall explains:

“As patron–client relationships expand throughout the political and economic spheres, effective regulation becomes increasingly weakened.”

He further argues:

“A prosperous entrepreneurial economic order tends to be associated with a decentralized democratic political system and a liberal social climate. During the ‘individualistic phase’ of the historical cycle, ‘fox-type’ elites and speculative entrepreneurs come to dominate the elite class, and these psychological characteristics promote the development of the market economy and democracy.” (Marshall, 2007, p. 30)

Circulation of Elites

Pareto developed these ideas about economic cycles into his theory of the Circulation of Elites.

He argued that the elite should not become a closed social group.

In his view, intellectuals and other members of the elite needed to remain open to new knowledge, technologies, and talented individuals in order to maintain their vitality and adaptability.

Marshall explains:

“As society moves through historical cycles, an elite must continually recruit new individuals with the appropriate talents if it is to survive. Otherwise, it will either decline from within or eventually lose power to a new elite.”

He further states:

“Closed elite groups, such as hereditary aristocracies, tend eventually to become rigid and decline.”

(Marshall, 2007, p. 31)

In this process, Pareto did not regard social inequality itself as the central problem.

Rather, he was primarily concerned with the continuous replacement and renewal of elites on the basis of ability and talent. He regarded the circulation of capable individuals into the elite as an essential condition for maintaining social vitality and promoting social development.

In other words, Pareto offered a realistic analysis of society, arguing that states and organizations are ultimately governed by a small number of elites, and that when those elites become incompetent or corrupt, the states and organizations they govern will inevitably decline or collapse.

References

Marshall, A. J. (2007). Vilfredo Pareto's sociology: A framework for political psychology. Ashgate.