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From Free-Trade Propaganda to the Theory of International Trade

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Vilfredo Pareto: An Intellectual Biography Volume II

Part of the book series: Palgrave Studies in the History of Economic Thought ((PHET))

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Abstract

In the period under examination, Pareto returned to the themes relating to international trade (in this regard, see Mornati (Vilfredo Pareto: An intellectual biography. Volume I. From Science to Liberty (1848–1891). Basingstoke: Palgrave Macmillan, 2018)) which he had earlier broached during his period of amateur journalism, in order to develop their theoretical aspects, and specifically to consolidate them within the framework of general economic equilibrium and the economics of well-being (for an earlier study of this issue, Maneschi (Journal of the History of Economic Thought XV-2: 210–228, 1993)).

Thus, after describing the free-trade principles to which Pareto had subscribed over the preceding 20 years (Sect. 6.1), we will delineate the arguments, made from a free-trade perspective yet analytical in character, which he advanced against the protectionist-oriented reasoning of Cournot and of Auspitz and Lieben (Sect. 6.2), before characterising in more detail Pareto’s first extended contribution to the theory of international trade (Sects. 6.3 and 6.4). Lastly, we will re-examine a number of other instances of the empirical analysis he applied concerning the consequences of customs protection (Sect. 6.5).

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Notes

  1. 1.

    In this regard, see Mornati (2018, pp. 153–160).

  2. 2.

    For an earlier study of this issue, Maneschi (1993).

  3. 3.

    Pareto to Felice Cavallotti, 14th August 1892, see Pareto (1989a, p. 165).

  4. 4.

    Pareto to Emilia Peruzzi, 22nd February 1894, see Pareto (1984a, p. 565).

  5. 5.

    Ibid., pp. 565–566.

  6. 6.

    Ibid., p. 566.

  7. 7.

    Pareto (1894a, p. 303).

  8. 8.

    Pareto to Maffeo Pantaleoni, 20th March 1891, see Pareto (1984b, p. 21).

  9. 9.

    Ibid., pp. 22–23.

  10. 10.

    Pareto to Pantaleoni, 26th March 1891, ibid., p. 27. In confirmation of the fundamental importance assumed by the battle for free trade for Pareto at this time, it is interesting to recall that in the first letter to Walras, Pareto asked him particularly, in anticipation of the forthcoming referendum on the Swiss customs tariff, whether there was a Swiss free-trade association he could contact, Pareto to Léon Walras, 23rd July 1891, see Pareto (1975, p. 160). On the 18th of October 1891 the Swiss people gave their verdict, in the referendum on the new customs tariffs, more protectionist than the existing ones, proposed by the government on the 2nd of May 1890, under pressure from majorities in the industrial and agricultural sectors, and which had been approved in parliament on the 10th of April 1891. The free-trade position, from which the demand for a referendum originated, was championed by the League against the increases in the cost of living (Ligue contre le renchérissement de la vie), which had in fact been mentioned by Walras, albeit without enthusiasm, in his reply to Pareto, 28th July 1891, see Walras (1965, p. 457). This latter lobby was made up of representatives from the export industry, a section of the working people’s trade union movement and by the nascent cooperative movement. It was led by the Neuchâtel federal councillor Numa Droz (a right-wing radical, at the time Foreign Minister). The new tariffs were approved by 212,000 votes to 147,000 as well as by the majority of the cantons, Humair (2004, pp. 545–580). A few weeks later, Pareto to Pantaleoni, 25th December 1891, see Pareto (1984b p. 131), had no hesitation in stating that Walras, “from his chair in Lausanne”, “would have performed a more useful service” by participating in the protectionist campaign rather than “giving a more or less rigorous demonstration that market equilibrium is reached by increasing the price through increased demand”.

  11. 11.

    Pareto to Pantaleoni, 18th August 1891, see Pareto (1984b, p. 56).

  12. 12.

    Pareto (1891a, p. 415).

  13. 13.

    Pareto to Emilia Peruzzi, 22nd February 1894, see Pareto (1984a, p. 566).

  14. 14.

    Pareto, Traités de commerce, in Nouveau dictionnaire d'économie politique, publiés sous la direction de L. Say et de J. Chailley. Avec supplément. Paris, Guillaumin, 1892, vol. II, pp. 1046–1050, see Pareto (1984c, pp. 75–76).

  15. 15.

    Pareto, ibid., p. 77, also claimed that the protectionists “have never been capable of formulating their ideas clearly”.

  16. 16.

    Ibid.

  17. 17.

    Pareto to Pantaleoni, 6th and 8th July 1891, see Pareto (1984b, pp. 42, 45).

  18. 18.

    Furthermore, Pareto to Pantaleoni, undated (but in late July or early August 1892), see Pareto (1984b, p. 259) expressed his continuing belief that “neither mathematics nor political economy alone will ever be enough to provide the solution to the problems of interventionism and of protectionism: sociology, history, physiology are needed”.

  19. 19.

    Cournot (1838, pp. 173–174).

  20. 20.

    Ibid., p. 175.

  21. 21.

    Ibid., p. 176.

  22. 22.

    Ibid., pp. 176–177.

  23. 23.

    Ibid., p. 178.

  24. 24.

    Ibid., pp. 178–180.

  25. 25.

    Ibid., p. 180.

  26. 26.

    Ibid.

  27. 27.

    Pareto (1892b, pp. 5, 8).

  28. 28.

    Edgeworth (1889, pp. 540, 559–560).

  29. 29.

    Auspitz and Lieben (1889, §§80–82).

  30. 30.

    Pareto to Pantaleoni, 1st January 1892, see Pareto (1984b, p. 147).

  31. 31.

    Pareto (1892c).

  32. 32.

    Ibid., p. 207.

  33. 33.

    Ibid., p. 208.

  34. 34.

    Also, according to Pareto, ibid., p. 211, it is impossible “in any way to consider … the entire sum which the government derives from the duties as profit for the country” since “in the case of modern governments …. the more money they have, the more they spend”.

  35. 35.

    Ibid., p. 209.

  36. 36.

    Pareto (1892d, note to pp. 159–160).

  37. 37.

    These, obviously, are valid also for II.

  38. 38.

    Pareto (1896–1897, § 294, note 1).

  39. 39.

    Ibid., §855.

  40. 40.

    Ibid., §856, note 1.

  41. 41.

    Ibid., §862.

  42. 42.

    Ibid., §863, note 1.

  43. 43.

    Ibid., §721, note 2.

  44. 44.

    Ibid., §863, note 2.

  45. 45.

    Ibid., §863.

  46. 46.

    Specifically, dΛ=−psdRs−ptdRt−…; in equilibrium psbs+ptbt+…= pxxb= pyxb; pscs + ptct +…=pxxc = pxyc

  47. 47.

    On the basis that the prices of t, s, … do not change, ibid., §864.

  48. 48.

    Ibid., §867.

  49. 49.

    Ibid., §§868–870.

  50. 50.

    Pareto (1895, p. 488).

  51. 51.

    Since ps(φ1a/pa)=φ1s…

  52. 52.

    Ibid., pp. 492–494.

  53. 53.

    Ibid., p. 495.

  54. 54.

    Ibid., pp. 492, 496–497.

  55. 55.

    Ibid., pp. 495–496.

  56. 56.

    Pareto (1896–1897, §882). The same reasoning had been already advanced by Pareto (1891b, p. 493) when he observed that, in the Italian steel industry, since customs revenue per worker were greater than the average salary, “it would be quicker just to allow Italians to purchase their requirements abroad and to pay the salary of the workers without making them work [or by assigning them] various other useful jobs of private or public utility”. Pareto (1891c, pp. 400–402) on the same topic pointed out that in 1889 the duty on iron and steel cost the country around 30 million francs, of which only 8 million (corresponding to the volume of imports multiplied by the duty) accrued to the state. This sum, divided between the 14,500 iron- and steelworkers, corresponded to 2100 francs per head, which amounted to twice the average value of their real earnings.

  57. 57.

    Pareto (1896–1897, §889).

  58. 58.

    Pareto (1895, pp. 482–484).

  59. 59.

    That is, 160/17.

  60. 60.

    That is, 151/18.4.

  61. 61.

    That is, 9.4/8.2.

  62. 62.

    Pareto (1894b, p. 143).

  63. 63.

    Pareto (1897, pp. 219–220).

  64. 64.

    Pareto (1898, p. 250).

  65. 65.

    Ibid., p. 251.

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    Fiorenzo Mornati

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Mornati, F. (2018). From Free-Trade Propaganda to the Theory of International Trade. In: Vilfredo Pareto: An Intellectual Biography Volume II. Palgrave Studies in the History of Economic Thought. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-04540-1_6

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