Pareto and Political Economy as a Science: Methodological Revolution and Analytical Advances in Economic Theory in the 1890s

Abstract

It is argued that Schumpeter's widely accepted judgment that Pareto's work is “completely rooted in Walras's system” constitutes a misreading of Pareto. In fact, already during the period 1892–1900, Pareto traces the methodological outlines of an economic science profoundly different from that of Walras. It is maintained that his methodological contribution represents an attempt to define the conditions for political economy to be a science. In this context, Pareto examines the theoretical premises of economic theories and questions the hypotheses of perfect foresight and rationality. The ordinalist hypothesis is also shown to be a consequence of these methodological reflections.