Economic phenomena and their economic and sociological parts
Pareto’s final contribution to the Giornale degli Economisti, “Economia sperimentale” (Pareto 1918 [2008]) attempted to make evident the economic implications of his sociological theory of social equilibrium.
He did so by differentiating between the economic part of the economic phenomenon, which is limited to local action when subjective tastes can be given exogenously, and the sociological part of the economic phenomenon, which extends to non-logical action and is influenced by endogenous derivations.there is almost no concrete problem that is exclusively economic, and not economic and sociological at the same time. In fact, very often the sociological part prevails over the economic part; examples of this are: the problem of free trade, or tariff protection; many monetary problems; almost all taxation problems; and other similar problems.... one does not leave the experimental field if one studies the economic and sociological parts separately. (Pareto 1918 [2008], 558)
When the economic phenomenon is significantly influenced by public policy, the interplay between residues and derivations are an endogenous influence on individuals’ views on their behaviour and welfare, then the mature Paretian position was that economic policy should be considered from both the economic and sociological perspectives. Consequently, economic theories of trade, money and public finance need to be complemented by the sociology of trade and protection, the sociology of money and fiscal sociology. This is because they all influence the distribution of economic goods among members of society - sometimes for welfare enhancing policy reasons but, in Pareto’s view, more often in response to relations between governing elites and their client economic elites. His concern is fundamentally the same as Adam Smith’s fear that legislators had introduced laws that benefited manufacturers and merchants but harmed the other great social orders and society in general. However, to examine such issues, Pareto concluded that sociological theories were more insightful than economic theories. He even asserted that the history of economists’ theories and doctrines on the government’s role in matters related to trade, monetary and fiscal policy was relevant to developing a sociological understanding of government activities in these areas.
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- Prologue