Economic Inequality, Pareto, and Sociology: The Route Not Taken

François NielsenUniversity of North Carolina – Chapel Hill

Revised February 2006

Word count: 7931

Keywords: income inequality, Vilfredo Pareto, circulation of elites

To appear in a special issue of American Behavioral Scien-tist

edited by John Myles and Martina Morris

Address all correspondence to François Nielsen, Depart-ment of Sociology, University of North Carolina, Chapel Hill NC 27599-3210. Email francois_nielsen@unc.edu. I am grateful to my late teachers Henri Janne and Jean Morsa for giving me helpful advice on this project, a long time ago.

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Economic Inequality, Pareto, and Sociology: The Route Not Taken

Abstract

Economist and sociologist Vilfredo Pareto (1848–1923) de-veloped a general theory of social inequality inspired by his discovery of similarities in the shape of the income distribution across societies. Pareto’s approach is charac-terized by (1) a focus on individual, continuous income variation rather than discrete classes; (2) attention paid to the entire socio-economic distribution rather than sum-mary statistics; (3) an emphasis on social heterogeneity (labor supply) rather than a view of social structure as a collection of empty places (labor demand); and (4) a con-ception of the inequality structure – and movements of in-dividuals within it – as resulting from the distribution of human abilities interacting with a structure of opportuni-ties (i.e., a structure of social selection). Pareto’s vision -- part of the common patrimony of economics and sociol-ogy -- foreshadows emergent approaches to socio-eco-nomic inequality.

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Economic Inequality, Pareto, and Sociology: The Route Not Taken

The history of social thought resembles the old graduate library with its tortuous stacks crumbling under the weight of dusty tomes full of forgotten but surprising ideas more than the undergraduate library with its luminous shelves of received contemporary theories beckoning to younger generations. In this paper I will present an overview of the work of engineer turned economist turned sociologist Vilfredo Pareto (Paris 1848 – Céligny, Switzerland 1923). Pareto’s work, while largely confined to the dusty shelves of the old graduate library, represents a rare conjuncture in which the issue of economic inequality and the com-bined fields of economics and sociology all came together. I will argue that Pareto’s intellectual evolution, as it pro-gressed from a strict focus on the shape of the distribu-tion of income to a broader, dynamic conception of social hierarchies (further specified into the well-known theory of the circulation of elites), presents several points of con-temporary value for understanding the late 20th Century inequality upswing that has affected advanced industrial societies such as the UK and the US. I will try to show that the fields of economics and sociology have intellec-tual connections in relation to economic inequality that go back a long way, despite apparent differences in basic credo and technical virtuosity. Thus the apparent late-ness of sociologists – compared to economists – in tack-ling the inequality upswing that Morris and Western (1999) diagnosed may be due in part to choices made a long time ago by the field of sociology – toward a concep-tion of economic inequality as arising from a structure of empty places reflecting systemic requirements for differ-ent kinds of positions (the labor demand side), and away from a consideration of social heterogeneity, i.e. the dis-tribution of talents and skills in the population (the labor supply side) (Myles 2003).

Revisiting Pareto’s early attempt to elucidate the struc-ture of income inequality produces a number of theoreti-cal glimpses well worth dusting off today. Had the route suggested by Pareto’s own intellectual evolution been better absorbed by the field of sociology, it is likely that our understanding of current inequality trends would be at once more advanced and more compatible with that of economists. Some of the themes developed in the paper are the following. First, as Pareto was both an economist and a sociologist, his contribution can be claimed by both fields and thus provides some grounds for solidarity,

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rather than rivalry, between the two disciplines. Second, because Pareto’s mathematical and statistical skills were well beyond those of the average social scientist of his days (including economists), and because his theoretical thinking was closely informed by a quantitative perspec-tive, much of Pareto’s contribution, including the part rel-evant to income inequality, has been misunderstood or ig-nored by contemporary and later generations of social sci-entists (Allais 1968; Parsons 1968). The close association between mathematical formalism and theory and the un-broken theoretical thread that winds through Pareto’s en-tire work imply that his sociology cannot be properly un-derstood without familiarity with his economic writings and at least an informal sense of the mathematical vision that underlies them (Busino 1967). Third, within Pareto’s own intellectual evolution one finds the outline of a theo-retical perspective that links the bare statistical regulari-ties in the shape of the income distribution to a model of the social structure that is inherently continuous (rather than postulating discrete classes) and that integrates mechanisms of demand (related to the division of labor) and of supply (related to human heterogeneity).

In the next section I will briefly outline Pareto’s contri-bution to understanding income inequality and his in-creasingly generalized use of the income distribution (and the idea that individuals are constantly moving up and down within this structure) as a parable for other kinds of structured social inequalities, including the distribution of political power and the circulation of governmental elites. Later sections will develop a number of points in which Pareto’s work ties in with current theoretical preoccupa-tions concerning income inequality and contributes to our understanding: (1) the waning influence of the notion of discrete social or occupational classes; (2) the emerging focus on the entire distribution of economic rewards, and its shape, rather than summary statistics such as inequal-ity indices; (3) the emerging realization of the importance of social heterogeneity (Pareto’s term, arguably equiva-lent to the concept of the supply side of labor; Myles 2003); and (4) the emerging conception of the structure of inequality as produced by the structure of human abili-ties and skills interacting with a structure of opportunities (i.e., a structure of social selection).

Pareto’s Morphological Schema

Schumpeter (1951) used the expression morphological schema to refer to the parts of Pareto’s work dealing with income inequality, social stratification, social mobility, and the celebrated theory of the circulation of elites. This sec-

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tion discusses in turn Pareto’s work on income distribu-tion, his extension of the income distribution model to the general social structure, and finally to the circulation of elites.

a. Distribution of IncomeAs Aron (1967: 461) notes, Pareto’s more specifically eco-nomic work on the distribution of income is at the root of his broader sociological conception of the social structure. Much of the relevant materials on this topic are found in Pareto’s first economics treatise (Pareto 1897: §957ff and the important note 2 to §962 misplaced on p. 461 of the additions; see also Pareto 1965).1 A historically more de-tailed account than the one presented here is in Busino (1967: 27-34).

Pareto’s point of departure was empirical. Toward the end of the 19th century agencies in England and other in-dustrial countries had begun releasing income distribution statistics giving the numbers of taxpayers in different in-come brackets. A discussion of these data by Leroy-Beaulieu (1881) greatly influenced Pareto. Pareto himself collected additional data sets, increasing the range of places and times of societies he could compare, occasion-ally finding such gems as the distribution of prices paid for an indulgence2 – the price of which varied according to the social rank of a person – in Peru at the end of the 18th century. Table 1 shows an example of such data, for Great Britain and Ireland in 1893-1894 (Pareto 1897: §958).

------ Table 1 about here ------To facilitate comparisons between societies with differ-

ent population sizes and currencies Pareto tried to find a simple mathematical expression that would fit the data for different countries and times. Having defined x as a given income, and N as the number of taxpayers having an income greater than x, and plotting N against x, he dis-covered a remarkable similarity among these reverse cu-mulative frequency distributions for different countries and times: if one plots the logarithm of N against the loga-rithm of x the points approximately trace a straight line with negative slope. Figure 1 shows the graphs obtained in this way for Great Britain and Ireland. The graph is higher for Great Britain because of the larger population (larger Ns), but the slopes for the two countries are ap-proximately the same.

------ Figure 1 about here ------1 Pareto subdivided his book-length works into numbered para-graphs. It is customary to use these numbers for reference. 2 An indulgence was the remission of temporal punishment for sins granted by the Roman Catholic Church.

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Empirical linearity of the (log x, log N) relationship cor-responds to a relationship between N and x given by

(1) log N = log A – log xwhere the slope α and intercept (log A) can be estimated from the distribution data by ordinary least squares (i.e., by fitting a simple linear regression to the data of Table 1).3

By eliminating logarithms in Equation (1) one obtains the reverse cumulative distribution function

(4) N = A / x

which gives, for any x, the number N of taxpayers (in gen-eral, income-receiving units) with incomes greater than x. To obtain the probability distribution function it is neces-sary to differentiate with respect to x and change the sign (as the distribution is cumulated backward), so that

(5) y dx = - (dN/dx)dxyielding the function

(6) y = A/xα+1

where y denotes the probability density for income x. The function is shown in Figure 2, where the shaded area rep-resents the number of incomes between x1 and x1+dx. Note that Pareto switches the x and y axes in Figures 2, to show incomes on the vertical axis and thus (presumably) better evoke the image of the social “pyramid” (the shape of which, he feels, is more like that of an arrowhead or a top than a pyramid). The straight-line segment with shal-low slope (corresponding to small incomes) at the base of the pyramid is not part of the graph of Equation (6). It is added by Pareto on the supposition that the frequency of incomes diminishes rapidly near the minimum level of subsistence, as it is impossible (by definition) for individu-als to survive below it.

------ Figure 2 about here ------Most of Pareto’s data sets can be fitted closely by a

function of the type of Equation (6). Furthermore the esti-mated value of α varies relatively little among the differ-ent data sets; is in all cases in the vicinity of 1.5. Thus, if one compares the frequency distributions of societies that differ substantially in time and space: “It looks then as if one has drawn a large number of crystals of the same chemical substance. There are big crystals, and one finds medium ones and small ones, but they all have the same shape” (Pareto 1897: §958).

3 Pareto found that in a few cases a better fit was ob-tained with the functions

(2) log N = log A - log (a+x), or(3) log N = log A - log (a+x) – βx

but that the estimated values of and β are negligible in prac-tice.

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The apparent universality of the shape of the distribu-tion of income as it follows what was later labeled a Pareto distribution, and even the similarity in values of the parameter “…in countries whose economic condi-tions are as different as those of England, of Ireland, of Germany, of Italian city-states, and even of Peru” (Pareto 1897: §960) profoundly impressed Pareto. He sensed the existence of some general mechanism underlying the shape of the distribution. The most obvious hypothesis was that the distribution is the result of chance, which for him was “…this set of unknown causes, acting now in one direction, then in another, to which, given our ignorance of their true nature, we give the name of chance” (Pareto 1897: §957). Pareto took pain demonstrating that the probability distribution of income cannot be assimilated to the distribution of sums of independent causes, which tends to a normal distribution (by the Central Limit Theo-rem) (1897: note 1 to §962).4

An alternative hypothesis is that the distribution of in-come is the result of social heterogeneity, i.e. differences in the probability of gaining income across categories of individuals (with number of categories set as large as one wants) corresponding to differences in “eugénique” quali-ties affecting the ability of individuals to acquire income. Pareto develops a stochastic process based on this as-sumption and shows that it indeed yields a limiting distri-bution that coincides well with empirical income distribu-tion data (1897: p.461, note 2 to §962).5 But Pareto does not find his own derivation compelling, as it depends on the assumption of perfect mobility of individuals in soci-ety: “[b]ut mobility among the different strata of society is far from being perfect. The law of distribution […] thus results [instead] from the distribution of qualities that per-mit men to enrich themselves and the disposition of ob-stacles that oppose the expression of these capacities.” (1897: p.461, note 2 to §962, emphasis added).

The next subsection describes how Pareto develops this insight into a more elaborate, dynamic model of social mobility. The uniformity discovered by Pareto in income statistics has had its own fate in the social sciences. It was later discovered that a large number of phenomena

4 The role of chance in generating the distribution of income was the object of a dispute between Pareto and contemporary economist Francis Y. Edgeworth, who held that the distribution of income was better fitted by a lognormal distribution. 5 Footnote to §962 is misplaced on p. 416 of the book, and thus has been missed by a number of commentators, although not by Aron (1967). It represents an astonishingly modern ap-proach to explaining a statistical distribution as the result of a stochastic process.

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obeyed “Pareto’s Law”, i.e. had distributions that could be well fitted by a Pareto function. These include the distri-bution of the populations of towns and cities, the fre-quency of use of words in the lexicon, industrial concen-tration, number of articles published by sociologists in professional journals, and various other geographical and linguistic statistics (Zipf 1949). A vast literature has at-tempted to propose models that account for the ubiquity of the Pareto distribution.6 The strong attraction felt by some scientists for the mystery and potential theoretical value represented by such uniformities, as well as the rather independent position of the phenomenon with re-spect to mainstream economic theory, was well ex-pressed by Schumpeter: “Few if any economists seem to have realized the possibilities that such invariants hold out for the future of our science […] nobody seems to have realized that the hunt for, and the interpretation of, invariants of this type might lay the foundations for an en-tirely novel type of theory” (1951: 121).

b. Mobility Within the Social PyramidThe evolution of Pareto’s ideas on income inequality and social stratifications can be seen in his later major eco-nomics textbook Manual of Political Economy (Pareto 1909, 1971) (hereafter Manual). Here he develops his earlier intuition that the universal presence of economic and social inequalities in human societies may well reflect “physical, moral, and intellectual” differences among indi-viduals, but are not their direct expression – as social in-equalities obey a specific, skewed distribution that differ from the normal distribution of biometric traits – into a more general and more dynamic model of the social structure. Figure 3, adapted from Pareto (1971: 287, Fig-ure 56), illustrates this generalized conception. The distri-bution is now used as a representation of the social hier-archy in general, not only the distribution of income. A pointed tip has been added to the pyramid (compare with Figure 2), as well as a more realistic, if speculative, bot-tom (as data on the bottom part of the income distribu-tion were usually unavailable in Pareto’s days). Using the analogy of the attribution of exam scores from 0 to 20 (in the continental grading system) as an analogy, he ex-plains the flattened bottom of the pyramid by the fact that there is a minimal level of income under which sub-sistence is not possible, just like a professor may be reluc-6 In sociology see Angle (1986) and Nielsen (1995) and litera-ture cited there. It is interesting that Angle’s simulation model excludes social heterogeneity and thus continues in a way the old Edgeworth-Pareto debate on the role of chance in generat-ing the distribution of income.

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tant to give scores below 8/20 to avoid failing students. On the other hand, there is no comparable limit to high in-comes.

------ Figure 3 about here ------Pareto speculates, in relation to Figure 3, that while the

shape of the upper part of the income distribution is strik-ingly similar across societies, there may be more diversity in the lower part. If one postulates that there is a mini-mum income oa below which individuals cannot survive, then in a society typical of classical antiquity, for instance, in which famines were frequent, the distribution may take the form (I), with a high frequency of incomes just above the starvation limit; in modern societies where conditions of life for the lower strata have improved and fewer peo-ple have incomes near that limit, the distribution may take the form (II). The passage of the Manual in which Pareto interprets the income distribution as a representa-tion of the social structure is worth quoting at length:

The area ahbc, Figure [3], gives a picture of soci-ety. The outward form varies little, the interior por-tion is, on the other hand, in constant movement; while certain individuals are rising to higher levels, others are sinking. Those who fall to [minimum sub-sistence level] ah disappear; thus some elements are eliminated. It is strange, but true, that the same phenomenon occurs in the upper regions. Experi-ence tells us that aristocracies do not last; the rea-sons for this phenomenon are numerous and we know very little about them, but there is no doubt about the reality of the phenomenon itself.

We have first a region [A] in which incomes are very low, people cannot subsist, whether they be good or bad; in this region selection operates only to a very small extent because extreme poverty de-bases and destroys the good elements as well as the bad. Next comes the region [B] in which selection operates with maximum intensity. Incomes are not large enough to preserve everyone whether they are or are not well fitted for the struggle of life, but they are not low enough to dishearten the best elements. In this region child mortality is considerable, and this mortality is probably a powerful means of selection. […] This region is the crucible in which the future aristocracies (in the etymological sense: αριστος = best) are developed; from this region come the ele-ments who rise to the higher region [C]. Once there their descendants degenerate; thus this region [A] is maintained only as a result of immigration from the lower region. […] one important reason [for this

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fact] may well be the non-intervention of selection. Incomes are so large that they enable even the weak, the ill-adapted, the incompetent and the de-fective to survive.

The lines [between regions] serve only to fix ideas; they do not actually exist. The boundaries of these regions are not sharply defined; we move gradually from one region to the other. (Pareto 1971: 286-288)

A sociologist today might interpret Pareto’s discussion in terms of the more familiar (albeit still mysterious) con-cept of opportunity for achievement. Social stratification researchers customarily assume that achievement oppor-tunity declines monotonically from the upper strata to the bottom ones. Pareto makes the rather different claim that opportunity varies non-monotonically along the social scale, with individuals in the middle strata having greater opportunity than both the lower and upper strata. This prediction follows logically from Pareto’s attention to the intensity of social selection as a function of position in the social hierarchy. A less talented individual born to a high stratum may be as effectively prevented by the absence of selection from “achieving” the low social status corre-sponding to his limited endowments as a talented individ-ual born to the lowest strata is prevented from achieving the high social status corresponding to his potential. In both cases opportunity for achievement is low, if one un-derstands “opportunity” as opportunity to achieve a sta-tus commensurate with one’s potential – high or low – given one’s intrinsic qualities, and thus as entailing both upward and downward movements in the social structure (Guo and Stearns 2002).

If one could measure the degree of opportunity charac-terizing a particular social group – or, ideally, opportunity as it varies continuously along a status dimension such as income – one could test Pareto’s conjecture against the traditional assumption that opportunity increases mono-tonically from lowest to highest stratum. Conceptualizing and measuring opportunity for achievement is itself a huge unresolved issue (for recent developments see Guo and Stearn 2002; Nielsen forthcoming). There are some crude indications that Pareto’s conjecture might be cor-rect. A phenomenon known since at least Blau and Dun-can (1967: 47) is that the dispersion of occupational sta-tuses of sons is lower for fathers in both high and low oc-cupational categories, greater for sons with fathers in middle status categories. The same pattern is found for both inter- and intra-generational mobility among wealth categories (Keister 2005). Blau and Duncan (1967) ex-

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plain this pattern in terms of the social distance among occupational groups: individuals born to fathers in middle categories are closer to a larger number of different cate-gories than individuals born to fathers in extreme cate-gories -- high as well as low -- whose movements are lim-ited either above or below. Alternatively, one could view the pattern as supporting Pareto’s conjecture of a higher degree of social selection in middle categories as com-pared to extreme ones. As indices of social mobility of the type Blau and Duncan (1967) use do not control for possible differences in the distributions of talents of sons born to different occupational categories, interpretations in terms of achievement opportunity are delicate in any case (Eckland 1967; Nielsen forthcoming).

c. Distribution of Power and Circulation of ElitesThe previous discussion shows how Pareto’s thinking on social stratification evolved from roots in income distribu-tion statistics by generalization (or extension) to general aspects of the social hierarchy. Successful economist Pareto turned to sociology for reasons having to do with his view of human nature and the limitations he found in the rational model of behavior that underlies economic theory (and which he had himself much contributed to de-velop) that are beyond the scope of this paper (Busino 1967; Nielsen 1972). One consequence of this shift was another extension of Pareto’s model of the social hierar-chy – as consisting of a distribution with a relatively stable shape within which individuals are in constant movement as the result of selection processes – to the distribution of political power in society. This new extension produced the theory of the circulation of elites, which is the part of Pareto‘s work with which sociologists are most familiar.

In a well known passage of the Treatise of Sociology (1917-1919: §§2027ff)7 (hereafter Treatise) Pareto imag-ines rating the capacity of each individual in all branches of human activity – business, poetry writing, chess play-ing, seducing powerful men, thieving – on a scale of 0 to 10. Individuals with high scores in any activity are deemed to be members of the elite; those with low scores members of the non-elite. The governmental elite is the subset of the elite comprising individuals who “…directly or indirectly play a notable role in government” (§2032). As Pareto warns repeatedly, the distinction between elite and non-elite is made for convenience and these cate-gories are not to be taken as real groups: “As usual, to the rigor one would obtain by considering continuous vari-

7 The Traité de sociologie générale was first published in English under the title Mind and Society (Pareto 1935).

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ations in the scores we must substitute the approximation of discontinuous variation of large classes…” (§2031).

In the same way that the stable curve representing the distribution of income contains within it and conceals the constant movement of individuals and families along the income scale, a similar circulation takes place along the scale of political power; the composition of the governing class, in particular, is constantly changing. Two types of movement are possible: (1) a continuous infiltration of el-ements from the governed class into the elite, or (2) a sudden revolution replacing at once the major part of the governing elite. Pareto’s almost poetic image is that of a slow moving river with periodic floods: “As a result of the circulation of elites, the governmental elite is in a state of slow and continuous transformation. It flows like a river; today’s elite is other than yesterday’s. From time to time one observes sudden and violent perturbations, similar to the inundations of a river. Afterwards the new govern-mental elite returns to a regime of slow transformation: the river, back within its banks, is flowing again steadily” (§2056).

Under what circumstances do sudden transformations of the elite – revolutions – occur? It is at this point that Pareto’s morphological schema, dealing with matters of social stratification, connects with Pareto’s psychosocial schema (again using Schumpeter’s 1951 terminology), which deals with Pareto’s theory of action and of human nature (Lopreato 1965). Detailed discussion of the psy-chosocial schema is beyond the scope of this paper, but to simplify greatly Pareto uses the concept of residues to mean sets of propensities to act in a certain way. Thus for example one type of residue consists of a propensity to use force, another of a propensity to use ideological means of persuasion. The central mechanism is thus: “Revolutions take place because – either following a slow-down in the circulation of the elite, or for some other cause –, elements of inferior quality accumulate in the su-perior strata. These elements no longer possess the residues capable of maintaining themselves in power, and they avoid the use of force. Meanwhile within the inferior strata elements with superior qualities develop, who pos-sess the residues necessary to govern, and who are dis-posed to use force” (§2057).

A close reading of the 18 pages (§§2025-2059) of the Treatise devoted to the general theoretical exposition of the circulation of elites reveals that there are two distinct circumstances that can produce a revolution, which are alluded to elliptically in the passage just cited as “follow-ing a slowdown in the circulation of elites, or for some

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other cause”. These circumstances are the following (Nielsen 1972).

(1) Slowdown or stoppage in the circulation of elites, which renders the governing class incapable of staying in power, because the aptitudes of individuals who have once achieved membership in the governing class are not transmitted to their descendants and the life of privilege protects the incapable. The absence of effective intergen-erational transmission of governing talent is crucial here; thus “[i]f human aristocracies were like choice breeds of domestic animals, that reproduce a long time with about the same traits, the history of the human race would be entirely different from what we know” (§2055).8

(2) Rapid circulation of the elite, but one bringing to the governing class individuals or families selected according to social criteria other than those corresponding to the ap-titudes needed to maintain themselves in power. An ex-ample used by Pareto is that of the introduction of indus-trial protection in a country. Individuals benefiting from industrial protection (such as owners of protected indus-tries, labor leaders, and politicians allied with them) will be those with an aptitude for economic and financial ac-tivities, and a large number of them will enter the govern-ing elite. The elite will thus become enriched with individ-uals who have a propensity to use “combinations”– legal and financial maneuvering and ideological persuasion – rather than force. When this proportion becomes too high the elite may no longer be able to maintain its political domination.

The Route Not TakenPareto’s work constitutes an interesting conversation piece in comparing economic and sociological approaches to economic inequality. Previous sections have described Pareto’s intellectual evolution on the issue from his dis-covery of mysterious uniformities in the shape of the dis-tribution of income across societies that differ widely in their economic bases, levels of development and cultures, to a generalized view of the social structure as repre-sented by a relatively stable distribution of resources within which individuals are constantly moving up and down, and finally to his even grander conception of the circulation of elites and the succession of aristocracies. Given that Pareto himself moved from the field of eco-nomics to sociology during his career, and is sometimes considered one of the founding fathers of sociology, one 8 Pareto’s reference to the imperfect transmission of genetic traits may be related to Francis Galton’s discovery of the phe-nomenon of regression to the mean in his studies of heredity of the late 1880s (see Stigler 1986: 265--299).

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would have thought that his work would have placed the issue of economic inequality squarely within the purview of sociology.9 In fact, there are a number of reasons why sociologists moved away from this quest. In this section I will discuss a number of ideas that were already explicitly formulated in Pareto’s work, that were sometimes more readily accepted by economists, and that seem worth un-earthing by sociologists as they pay renewed attention to the distribution of income. The evolution of ideas since Pareto’s time may have made the broader intellectual Zeitgeist today ripe for such revisionism. As Pareto was a sociologist, as well as an economist, we can derive some satisfaction as sociologists in the thought that we are not in any way imitating economists; as sociologists we have an inherited intellectual claim to these ideas. a. What! No Classes?As Myles (2003) has correctly argued, part of the problem sociologists have with income inequality is that income is an inherently continuous quantity that does not fit well with the notion of discrete (or discrete-izable) social classes that many sociologists feel comfortable with. No discrete classes are to be seen in income distribution sta-tistics, except for the arbitrary brackets used by the data collector. The problem is more than methodological or one of mental imagery. The existence, actual or potential, of discrete social classes is a sine qua non of any political or moral view that links social science enquiry with a vi-sion of future social justice brought in by a proletarian revolution. The absence of readily visible social classes may be a disappointment within this perspective. Even when Pareto comes closest to a notion of discrete classes, in his theory of the circulation of elites, his approach would still feel threatening to one with socialistic ideals, because of Pareto’s irreducible Machiavellian cynicism. If one were to try identifying the non-elite as somehow equivalent to the proletariat to salvage a proletarian revo-lution scenario, Pareto would swiftly challenge such an il-lusion. He would presumably point out that, first, chal-lengers of the elite typically themselves originate in the middle classes or even in the traditional elite, and only rarely in the most disfavored strata; and, second, that leaders of revolutionary movements challenging the in-cumbent elite typically do not emphasize their own self-interest in taking over power; rather they veil their chal-lenge in an ideology that presents future victory as one 9 A tiny but perhaps significant piece of trivia is that standard French dictionary Petit Larousse Illustré describes Pareto as “so-ciologue et économiste”, seemingly giving pre-eminence to the sociological contribution.

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for the people as a whole, or at least for a large segment of the population.10

Studying the distribution of income encourages a con-tinuous view of social status and an individualistic, rather than class, focus. Even occupational groupings tend to dissolve in this perspective, as the spread of income turns out to be considerable within occupational categories and has even increased during the current inequality upswing relative to differences between categories.

b. Distributional FocusAnother point of view characteristic of Pareto’s work and that is currently on the ascent in studies of economic in-equality is a focus on the entire distribution of a resource, such as income or wealth, rather than on a summary measure of inequality. Recent methodological work on relative distribution methods is exemplary of that trend: the new methodology facilitates refined empirical compar-isons of two or more distributions (between men and women, between societies of different types, or for the same society at more than one point in time) without re-ducing them to summary statistics (Alderson, Beckfield and Nielsen, in press; Handcock and Morris 1999; Morris, Bernhardt and Handcock 1994). Thus it is possible to de-tect the segment of the income scale for which the distri-butions differ most, or what change in a distribution over time is responsible for an overall increase in inequality. These developments are promising for future studies of inequality and fit well within the research tradition Pareto inaugurated.

The proximity of the recent Great U-Turn in inequality in the US and the UK (Alderson and Nielsen 2002; Blue-stone 1990; Harrison and Bluestone 1988; Nielsen and Alderson 1997; Thurow 1987) should not diminish the im-portance of an earlier episode of intellectual sharing be-tween economists and sociologists on an issue concerning inequality. Perhaps the major theoretical contribution to understanding historical inequality trends prior to the cur-rent upswing was the marvelously rich piece by Kuznets (1955). While second-hand capsule descriptions of Kuznets’s argument as predicting a decline in inequality in mature industrial societies may well make it sound like

10 For example Chirot (1986) presents fascinating evidence that the leaders of the Communist Party and the Nationalist Party during the Chinese civil war had very similar social origins, pre-dominantly from the traditional elite and middle classes, with practically no representation of the peasant classes in either party, and similarly high proportions of individuals with univer-sity degrees -- proportions much greater than that for China as a whole at that time.

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an apologia for liberal capitalism, the paper itself is a far cry from such a simplistic interpretation in both tone and substance. The article is a dramatic confrontation be-tween all of Kuznets’s theoretical instincts – telling him that so many economic and social trends associated with industrialization must be working toward increasing in-equality, and a handful of preciously few empirical data points that suggest instead an inverted-U trajectory, with inequality eventually declining in mature industrial soci-eties after reaching a peak during early industrial devel-opment. One must read the piece to truly appreciate the author’s disbelief at his own conclusions. Kuznets’s work contributed to establish an approach to income inequality that examines the effects of macro-eco-nomic and social changes on the entire distribution of in-come. Kuznets implicated the uneven spread of industrial technology, urban migration, the demographic transition, the spread of education and many other factors in the dis-cussion of the inequality trajectory. Of particular interest to sociologists is that Kuznets (1955) explicitly acknowl-edges the limitations of pure economics in understanding macro-historical income inequality trends, and calls upon demographers and sociologists to join economists in a common project of elucidation of these trends (Kuznets 1955; see also Lindert and Williamson 1985; Nielsen 1994; Nielsen and Alderson 1995).

c. Role of Social HeterogeneityRecent research into the late 20th century inequality up-swing has cast doubt on one of sociology’s shared legacy – the interpretation of the social hierarchy as a structure of empty places rooted in the social division of labor – by revealing that wage dispersion is increasing largely within, rather than among, occupational categories (Lin-dert 2000; Myles 2003; Nielsen and Alderson 2001). Fur-thermore this increased dispersion is not completely ac-counted for by individual differences in measurable skills such as educational credentials. Such phenomena point to the importance of social heterogeneity, i.e. broadly speaking, the fact that individuals are not identical pawns that can be interchangeably placed into the empty slots of a social structure determined by a specific division of la-bor. Individuals differ among themselves, not only with respect to measurable, achieved characteristics such as educational degrees, but also with respect to characteris-tics that are typically not measured in the context of pop-ulation surveys, such as cognitive abilities and personality traits. These aspects of labor supply (as contrasted with the demand represented by the empty places) are be-

16

coming increasingly prominent in inequality research (Myles 2003).

Social heterogeneity is a central aspect of Pareto’s model of social mobility. While the nature of the labor supply, and in particular the distribution of measured and unmeasured abilities and skills in the labor pool, is likely to become a major focus of research in inequality trends, it is not clear that sociologists are fully aware of the impli-cations. Admitting that individuals are intrinsically differ-ent in their abilities to carry out different occupations may require accepting that part of human heterogeneity within a given population has a genetic basis. Such a conclusion with respect to intelligence has become mainstream fare in the field of psychology (Brody 1992; Neisser et al. 1996). Are sociologists ready to consider genetic aspects of human heterogeneity? The media and intellectual commotions surrounding publication of Herrnstein (1971) and Herrnstein and Murray (1994) suggest that many are still uncomfortable with these ideas, although new conge-nial expositions may facilitate acceptance (Pinker 2002).

d. Human Qualities, Obstacles, and Opportunity for AchievementAs is clear from the work on the distribution of income, Pareto explicitly rejected the notion that the distribution of income is a direct expression of the distribution of hu-man qualities in the population. He viewed the social hi-erarchy, and the movement of individuals within it, as produced by the combination of the distribution of human “qualities” relevant to acquiring social resources and sta-tus and the disposition of “obstacles” opposing individual movements. While in the model of income distribution the nature of the “qualities that permit men to acquire wealth” is left rather vague, Pareto would later, in his model of the circulation of elites, attempt to specify residues, or propensities of individuals to act in certain ways, such as using “combinations” versus force in achieving one’s goals. The concentrations of individuals with different kinds of residues in the elite, as they strengthen or weaken it, constitute the principal mecha-nism of elite replacement.

With respect to economic achievement the social struc-ture is viewed as the product of a process of selection of individuals within the social hierarchy, with the intensity of selection varying in intensity at different levels of the social structure. As mentioned earlier, cast in a modern terminology Pareto’s discussion refers to something close to what contemporary social scientists would refer to as opportunity for achievement. The idea that socio-cultural evolution might affect the degree to which social mobility

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depends on individual skills and abilities, and in particular that the importance of cognitive abilities for socio-eco-nomic achievement might vary according to level of in-dustrialization or specific aspects of national cultures, is an old one (Lipset and Zetterberg 2001). Herrnstein (1971) and especially Herrnstein and Murray (1994) make a compelling description of the growing importance of cognitive abilities in industrial societies in the course of the 20th Century (as manifested in such clue as the in-creasing selectivity of top educational institutions, among others; see also Juhn, Murphy and Pierce 1993; Murnane, Willett and Levy 1995). The furor over their work has ob-scured the fact that very similar conclusions, albeit cast in slightly different terms, had long been well established in sociology (Duncan, Featherman and Duncan 1972: 69-105). The idea that achievement is substantially affected by cognitive ability (or, potentially, other aspects of per-sonality) obviously hits a raw nerve, with the negative emotion springing from political, moral, and even spiritual sources. More than technical deficiency, the principal ob-stacle facing sociologists in developing an effective theory of economic inequality may be the continued temptation to deny the philosophically inconvenient reality of a cen-tral role of human heterogeneity in social mobility pro-cesses.

ConclusionPareto occupies a peculiar position in the history of sociol-ogy. His work has impressed and profoundly influenced a number of sociologists including Raymond Aron (1967), Lawrence J. Henderson (1935), George Homans (Homans and Curtis 1970), Gerhard Lenski (1966), Joseph Lopreato (1964, 1965), Talcott Parsons (1968), and Pitirim Sorokin (1928), among others. Many other sociologists, European as well as American, have instinctively disliked Pareto. Schumpeter (1951) has probably diagnosed most accu-rately the source of this aversion: “One has only to imbue oneself with the spirit that pervades an American text-book and then open Pareto’s Manuel in order to realize what I mean: the naïve lover of modern social creeds and slogans must feel himself driven with clubs from Pareto’s threshold; he reads what he is firmly resolved never to ad-mit to be true and he reads it together with a disconcert-ing wealth of practical examples” (p. 112). Pareto was no paragon of political correctness. Some reactions to Pareto’s work (e.g., Coser 1977; Gurvitch 1966) bear a striking resemblance to more recent hostile reactions to Herrnstein (1971) and Herrnstein and Murray (1994).

I have argued in this paper that Pareto’s work on in-come inequality and social stratification in general might

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be well worth unearthing, for the insights it gives on a sin-gular episode in the history of social thought in which the experiences of a talented economist and of a talented so-ciologist combined, within the same person, to produce a remarkable perspective on the puzzle of social inequality.

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Table 1 – Reverse cumulative distribution of income in Great Britain and Ireland for Year 1893-1894; income in £ (x) and number of incomes greater than x (N). SOURCE: Data from Pareto (1897: § 958).

Income (£) Great Britain IrelandX log x N log N N log N150 2.18 400648 5.60 17717 4.25200 2.30 234985 5.37 9365 3.97300 2.48 121996 5.09 4592 3.66400 2.60 74041 4.87 2684 3.43500 2.70 54419 4.74 1898 3.28600 2.78 42072 4.62 1428 3.15700 2.85 34269 4.53 1104 3.04800 2.90 29311 4.47 940 2.97900 2.95 25033 4.40 771 2.89

1000 3.00 22896 4.36 684 2.842000 3.30 9880 3.99 271 2.433000 3.48 6069 3.78 142 2.154000 3.60 4161 3.62 88 1.945000 3.70 3081 3.49 68 1.83

10000 4.00 1104 3.04 22 1.34

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2.0 2.5 3.0 3.5 4.0 4.5Log10 x

1

2

3

4

5

6

Log 10

N

IRLGB

CNTRY

Great Britain

Ireland

Figure 1 – Comparison of the reverse cumulative distribu-tions of income for Great Britain and Ireland, 1893-1894. Plot of Log10 N (number of incomes greater than x) against Log10 x (income in £). SOURCE: Redrawn from Pareto (1897: §958, Figure 47). See Table 1 for data.

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Figure 2 – Typical shape of the income distribution. In-come x (vertical axis) against probability density y (hor-izontal axis). SOURCE: Pareto 1897: §961, Figure 48.

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Figure 3 – Comparison of income distribution in classical antiquity (I) and a modern industrial society (II). SOURCE: Modified from Pareto (1971: 287, Figure 56).

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