Social equilibrium and its economic aspects
Pareto’s conception of social equilibrium was developed in its most expansive form in the final volume of his Sociologia. It considers the social state with respect to: the distribution of conformist and nonconformist behaviour by individual members of
a society; the political balance between individualist and collectivist social organization; and the general economic equilibrium between the activities of high-risk-taking speculators and risk-averse rentiers.
The key positive issue that Pareto seeks to address is whether the social equilibrium is stable, in which case the prevailing pattern of social, political and economic action continues, or unstable, in which case forces of change are overcoming the forces of conservation with the relative proportions of speculators and rentiers among economic elites starting to change and the political balance influenced by pressures to alter the proportions of individuals among governing elites who are pro-individualist (decentralizing) and pro-collective (centralizing). As such, instability in social equilibrium is associated with elite conflict and changes in patron-client relations among political and economic elites.After systematic reflection on written texts that outline social and economic doctrines, Pareto concluded that the (quasi)logic used to justify social theories tended to rest on the acceptance of some residual sentiment. He called this observed residual sentiment “residues” and referred to the form of language in which residues are expressed and rationalized as “derivations”, because they derive from sentiment and constitute the form in which ideology is rationalized. Pareto briefly considered whether the study of social equilibrium with reference to residues and derivations could be undertaken on the same bases as economics, with residues being akin to subjective “tastes”.
However, he quickly rejected that approach because derivations are a variable and endogenous influence on non-logical human action:[I]n activity based on residues human beings use derivations more frequently than strict logical reasonings... Residues are not, like tastes, merely sources of conduct; they function throughout the whole course of the conduct developing from the source, a fact which becomes apparent in the substitution of derivations for logical reasonings. (Pareto 1916 [1935]: 1442-3)
As a first approximation, Pareto considered the theory of social equilibrium with reference to the two main classes of residues: class I, instinct for combinations, and class II, persistence of aggregates. The instinct for combinations is the subjective force for change associated with a faith in the effectiveness of reordering social concepts and social arrangements. Persistence of aggregates is the subjective force for preserving the prevailing social relations, such as relations within the family, and between places and social groups. Derivations linked to class I residues may advocate reformist ideologies (irrespective of the character of change being advocated) while derivations linked to class II residues may advocate conservative ideologies (irrespective of the social arrangement being preserved). He then used those notions to specify his “fundamental sociological theorem”, namely, that a general and rough explanation of social change is evident from the relative proportions of class I and class II residues among the ruling class and among the subject classes (Pareto 1916 [1935]: 1921). In relation to economics, the main consequence of non-logical action evident from this fundamental theorem and the economic balance between speculators and rentiers related to long-run economic growth and development:
In our day, for instance, the enormous development of economic production, the spread of civilisation to new countries, the remarkable rise in the standard of living among all civilized peoples, are in large part the work of speculators. But they have been able to do that work because they came from populations in which class II residues were numerous and strong. (Pareto 1916 [1935]: 1578)