II. PARETO’S INFLUENCE ON THE MAIN SCHOLARS OF THE ITALIAN TRADITION: THE FIRST GENERATION

In order to highlight specific involvement in the Paretian revolution, it is not possible to review all the scholars of the Italian tradition in this paper, but, for analytical convenience, the contributions of the main representative scholars from each of the three generations of that tradition are overviewed, although only when they reveal some Paretian influence. In this section, the first generation is considered, which is traditionally associated with the scholarship of Pantaleoni (1857–1924), De Viti (1858–1943), Barone (1859–1924), Mazzola (1863–1899), Graziani (1865–1944), Montemartini (1867–1913), Flora (1867–1958), and Conigliani (1868–1901). However, attention is directed only towards the works of Pantaleoni, De Viti and Barone, as they are the first-generation scholars who were most interested in Pareto’s methodological revolution. Mazzola and Conigliani died before they could come under the influence of the full force of Paretian methodology. Montemartini was not greatly influenced by Pareto, not only because of his death at an early age but also because of the significant Austrian influence on his scholarship, which derives from his study of Menger and Böhm-Bawerk,Footnote ³ and because he was a civil servant whose professional interests in practical policy problems came to dominate his interest in presenting fiscal theory over the last decade of his life. Finally, Flora and Graziani were scarcely touched by Pareto’s ideas, as both accepted the hedonistic form of marginalist public finance associated with Sax and Ricca Salerno, although, of the two, Flora’s general approach was more descriptive and quite similar to the approach that prevailed in Italy prior to the emergence of De Viti’s more subtle and thoughtful presentation of marginalist fiscal thought. Pareto certainly did not regard Graziani highly: “it is clear that he [Graziani] didn’t understand anything. In Italy, you have some grand donkeys for professors of Political Economy” (letter to Pantaleoni, 9 December 1907; De Rosa 1960, III, p. 76).

It must be conceded first that Pantaleoni and De Viti kept substantially to their respective pre-Paretian methodology (Fossati forthcoming). Nevertheless, their idea of science was not incompatible with Pareto’s, although, to varying extents, neither author accepted the core of Paretian economic methodology. Neither became interested in the ‘sociological approach’ to public finance, perhaps because when Pareto’s Trattato di Sociologia Generale was published, they were close to sixty years of age.

Pantaleoni, who was a personal friend, was deeply involved in Pareto’s methodological revolution. From one side, perhaps owing to his friendship, he acted as a keen supporter of Pareto in Italy and abroad.Footnote ⁴ However, from his esteemed position among Italian scholars, he also played an important role in negating the dissemination of certain distinct aspects of Pareto’s methodology.

Among Italian economists, part of the opposition to Pareto was based on the relative difficulty of obtaining practical results within the general equilibrium approach when compared to the partial equilibrium analysis inspired by Marshall; for example, analysis of the economic effects of taxation. However, some of the opposition to general equilibrium was directed also towards the use of mathematics in economic theory. It came from the so-called “literary economists,” and was directed against Pareto as the principal exponent of the “mathematical school.” In fact, beyond a mechanical notion of the rudiments of marginal analysis, some scholars simply were unable to grasp the technicalities of maximization. In general, they preferred to work at the level of graphical representation, although some had problems deriving marginal curves from total curves.

In regards to Pantaleoni himself, his opposition to mathematics was only incidental. At first, his direct opposition was towards the Paretian general equilibrium approach that was at odds with his Marshallian approach, albeit extended with his concept of related prices.Footnote ⁵ This is clear from Pantaleoni’s obituary for Pareto: “I think Pareto’s generalizations of economic equilibrium to have reached a limit beyond which I do not see much benefit for science to go.… I consider Pareto to have closed, in economics, a direction of research. In this line I consider him as the last of the Mohicans” (quoted from McLure Reference McLure2007, p. 111). However, what Pantaleoni mainly resented was the attack on his own hedonistic approach, implicitly carried out in the Manuale by the Paretian theory of consumer choice.Footnote ⁶ It appears likely that Pantaleoni became conscious of this only after Sensini’s review of the Manuale. In his correspondence with Pareto on the Manuale before its publication, Pantaleoni reveals no particular ill feeling. That all changed after Sensini’s review of the Manuale, when he openly and sternly opposed Paretian methodology, and began to try to influence other scholars on the matter.

Circumstantial proof of this hypothesis might be found in the hostility between Pantaleoni and Sensini. By way of illustration, Sensini sent a review article on Pareto’s Manuale Footnote ⁷ to Pantaleoni, to which Pantaleoni responded with “an insulting letter by which, in short, it was stated that the review was not the work … [of Sensini] … [who was not even able] to understand the mathematical formulae written in the review … [and in which Sensini] was accused of lacking scientific integrity.”Footnote ⁸ From this letter, it seems that Pantaleoni was accusing Sensini of plagiarizing equations from the Manuale without understanding them. However, from Pareto’s other letters, it is clear that Pantaleoni did not think that Sensini was able to understand the Manuale in general. For instance, on 27 July 1907, Pareto wrote: “as you say, ‘a review may be a sum of excerpts of the book’, but … it seems to me that Jona’s and Sensini’s reviews are not a set of excerpts from my book, but are original works made by persons that have understood and mastered a doctrine” (De Rosa Reference De Rosa1960, III, p. 48).

Perhaps Sensini was only a scapegoat, since the friendship with Pareto prevented Pantaleoni from starting a direct public dispute. Pareto, in a letter to Pantaleoni on 27 July 1907, lamented that “as soon as a young man speaks well of the things that I do, at once you state that he does not understand them.… However, dear friend, … I am the best judge of whether one understands my thought or not.…” The psychological explanation offered by Pareto was that Pantaleoni was convinced Pareto was being used as a “diving board to start flying” (De Rosa Reference De Rosa1960, III, pp. 46–47). In support of this it should be noted that, in the letter in question, Sensini was mentioned specifically as one of those young men. It seems that Pareto was right: in fact, three years later, Pantaleoni wrote to him on 15 December 1910: “I do not want you to be exploited. And this is the impression I have” (De Rosa Reference De Rosa1960, III, p. 382).

At any rate, we know that in 1911, Sensini returned the attack with a review article in the Libertà economica, Footnote ⁹ and reiterated it in his book Teoria della rendita. Pantaleoni did not reply directly, but it is easy to see that the paretaio episode (Jannaccone Reference Jannaccone1912) was not only a reaction against the Paretian mode of science, but also an attack on Sensini that is directly in line with Pantaleoni’s point of view.Footnote ¹⁰ The matter appears in almost all the thirteen letters Pareto wrote to Sensini between 21 June and 8 December 1912. The contents of some of these letters support the view that there is a link between Sensini’s criticisms of Pantaleoni and Jannaccone’s attack on Sensini. Provided the initial J. stands for Jannaccone, as seems quite likely, the following example illustrates the situation clearly. On 21 June, Pareto wrote: “It was to be expected that the liveliness of your attack would be met by a lively defence. For this reason I recommended temperance of form to you, because I foresaw that that would have been favourable to you in the harsh fight you had to sustain[Footnote ¹¹]. By now, what is done is done; you have only to take care of the defence of your work. You should respond to J., so that others do not feel like doing the same” (Sensini Reference Sensini1948, p. 71).

More evidence that Sensini represented the means by which Pantaleoni rejected Pareto’s methodology concerns the 1910 open competition for the Chair in Political Economy at Genoa University, for which Pantaleoni was a member of the selection commission. The matter is discussed in Pareto’s letters to Sensini and Pantaleoni on 12 December 1910, Pantaleoni’s reply of 15 December, and the three-page letter that Pareto wrote to Pantaleoni on 17 December. Pareto resented the statements of the selection commission, which found that: i) Sensini had simply duplicated Pareto’s theory; and ii) Sensini’s theory (i.e., Pareto’s) largely was wrong because “it is spoiled by reproachable excess of language towards high-authority economists, by critiques not always well founded of accepted scientific theories, which the Author replaces with statements lacking rigorous proof, and by ambitions of originality that are at variance with the history of economic thought” (De Rosa Reference De Rosa1960, III, p. 153).

As for De Viti, who was responsible for the spread of marginalism in Italy due to his role in the Giornale degli economisti, the story is altogether different. On the one hand, De Viti’s scientific approach was aimed at explaining public actions by economic reasoning, and specifically by marginal analysis for public goods. Pareto was opposed to explaining public actions by economic assumptions only, especially when the principles of using marginal analysis were employed to explain equilibrium conditions for public goods. As a direct consequence, De Viti and Pareto were at odds from the very beginning. Over time, De Viti became increasingly dependent on the notion of ‘public need,’ and moved further away from the Paretian position.Footnote ¹² Notwithstanding this, the gap between the approach of De Viti and Pareto often is exaggerated, at least in the use of marginal analysis for public goods. In fact, even if he was able to give a verbal statement of the public goods efficiency condition in 1888—he considered it as an abstract or ideal condition, not really helpful in explaining concrete states—he does not even mention it in works published subsequent to his 1888 booklet.

On the other hand, De Viti’s Principî di Economia Finanziaria is credited as a seminal work on the effects of taxation, whose original characters are both the Paretian idea of market interdependence, and the necessity of considering the expenditure of the tax income. These characters may be tracked back in De Viti’s thought to the first years of the 1920s in the successive editions of his ‘lessons.’ While this is correlated broadly with Pareto’s death in 1923, it is mere coincidence. De Viti’s enlarging of his treatment of tax shifting depends on the fact that he returned to his scientific activities, and this concerns the increase in the time available to him, made possible by the drastic reduction in his political commitment after leaving Parliament.

Barone has his own independent interest in sociology, which, no doubt, partly is responsible for the reservations he had regarding the newly emerging Paretian sociology. Even if, in principle, he was sympathetic, in practice, he concluded that a complete and viable Paretian sociological system was lacking.Footnote ¹³ However, even though he did not work with Paretian sociological tools, he, like Pareto, firmly refused both the notion of ‘public need’ and the application of marginal analysis to determine the equilibrium for public goods. Of course, Barone was a sound mathematician and, in principle, fully accepted Pareto’s economic revolution, even though, for pragmatic reasons, he also applied Marshallian partial equilibrium analysis. More specifically, he used the Paretian economic methodology in his major economic works, such as his Il ministro di produzione, although he relied frequently on Marshallian partial equilibrium analysis. Pareto acknowledged this mix when he wrote to Pantaleoni on 2 April 1908 concerning a possible common project: “I don’t know whether he [Barone] would like to consider the mutual interdependence of the phenomena but in short, if he did, it would be excellent” (De Rosa Reference De Rosa1960, III, p. 85).

However, he also used extensively economic methods in analyzing fiscal activity, including Paretian economic methodology, in a manner contrary to Pareto’s idea of relying on sociological tools to examine fiscal affairs: in that, Barone went well beyond the strict Paretian message, and “was prepared to consider the economics of fiscal activity in a manner that relied on economic theory well beyond that which Pareto regarded as legitimate” (McLure Reference McLure2007, p. 100). Nonetheless, many of the fiscal problems he analyzed are applied economic problems in the strict Paretian definition, so that he, like Borgatta (see below), may be considered to be in line with the essential Paretian message.

Barone recommended the “economic” principle of taxation to be that where the system of taxation lowers the growth of average national income as little as possible.Footnote ¹⁴ The rationale is based on Pareto’s law of income distribution, because in that case, a rise in average income brings either a simultaneous rise in all incomes, or some individuals move from a lower to a higher income (Barone 1911–12, p. 46). Fasiani stated that such a principle of taxation is not scientific because Barone’s principle depends on the value judgment that a more equitable income distribution is to be preferred to a less equitable one. However, if the rise in the average income entails growth in the utility level of one or more individuals without harming the utility of any member of society (i.e., at least some incomes rise and none fall), this outcome is consistent with a Pareto optimum improvement. Consequently, Barone was right in the sense that his fiscal policy principle is “economic” in that it is based on an economic efficiency criterion only, and not on value judgments.

III. PARETO’S INFLUENCE ON THE SECOND GENERATION

When conventionally considered, the second generation in the Italian tradition in public finance comprises Einaudi (1874–1961), Fanno (1878–1965), Ricci (1879–1946), Sensini (1879–1958), De Pietri Tonelli (1883–1952), Griziotti (1884–1956), Borgatta (1888–1949), and Murray (1888–1961). However, in this study, attention is confined to Einaudi, Sensini, Griziotti, Borgatta, and Murray. The works of Fanno, Ricci, and De Pietri Tonelli are not considered because their interests primarily concerned economics and not public finance. In regard to Ricci, however, it is worth noting that he largely accepted the Paretian economic methodology (particularly the hedonistic expression of pure theory outlined in the Cours), but was more than skeptical of Pareto’s sociology. In fact, his review of Trattato di sociologia generale was not appreciated by Pareto at all: on 31 August 1918, he wrote to Sensini: “I enjoyed reading the article by U.R. He proves that Sociology is full of nonsense and praises the author. Tasso wrote: ‘Great architect of slanders, adorned in new clothes, that are accusations but appear as praise’” (Sensini Reference Sensini1948, p. 113). In his letters to Vittore Pansini, dated 29 July and 31 August 1918, Pareto writes on the issue with reference to the same quotation from Tasso in the first letter (De Rosa 1962, p. 149), but in the second, he qualifies the point: “however, Ricci writes stupidities rather than slanders” (De Rosa 1962, p. 152). In the letters to Pantaleoni,Footnote ¹⁵ Pareto used even stronger words: “ignorance, negligence and bad faith” (De Rosa Reference De Rosa1960, III, p. 244). Thus, by 1918, Pareto was on poor personal terms with Ricci, even if it can be argued that he appreciated Ricci’s scientific work on economics. For instance, see the letter from Pareto to Sensini dated 11 October 1906 (Sensini Reference Sensini1948, p. 21), and the letter to Pantaleoni on 3 September 1912, which reports that “we had the great pleasure to see here a dear, good friend like Panella. Ricci also came, but for half a day only” (De Rosa Reference De Rosa1960, III, p. 166). Years later, in a letter to Pantaleoni dated 30 August 1921, he said that, even though he was not a friend, Ricci’s economic works “have many good parts” when considered objectively from a scientific perspective (De Rosa Reference De Rosa1960, III, p. 290).

When considering Einaudi, it must be recognized that he was an important personality who greatly contributed to the Italian tradition. He influenced other prominent Italian scholars, and his academic influence was very strong in the first half of the twentieth century, reaching beyond his direct pupils Borgatta, Fasiani, and Fubini. Perhaps it may be said that even the first generation of public finance scholars in the immediate post-World War II period attest to the Einaudian ascent. Apart from some formal appreciation of Pareto’s economics,Footnote ¹⁶ Einaudi was one of the scholars who was most unresponsive to Pareto’s multidisciplinary logico-experimental methodology and sociological theory. He always maintained a personal approach, first of all based on common sense, and then on a great eclecticism that allowed him to move from hedonistic marginalism to a softened version of Stein’s reproductivity theory. For him, moral values influence scientific reasoning: in Einaudi (Reference Einaudi1943b), there is a passionate defence of value judgments in the social sciences. He had an ethical notion of State, which was not only the producer of goods and services useful to the community, but also was bound by ethical precepts. From that angle, his position was antithetical to the idea of science of Pareto, and even seemed to represent a continuation of the pre-scientific approach; i.e., prior to De Viti.

From the point of view of general public-finance theorizing, Einaudi adopted an approach surely not Paretian. He maintained that tax systems are explained by the conscious or unconscious attempt of the lawmakers to avoid the double taxation of savings, since governments tend to tax consumption using all possible means, including taxation of the produced income, because, in reality, the part that “the law maker presumes destined to savings” is exempted. In the same way, tax progressivity comes from the “reasonable” assumption that the need to save grows less than proportionally to the growth of savings. Qualitative discrimination of incomes is explained in the same way, since labor income is temporary. Finally, estate taxation is a technical tool designed to obtain tax exemption for savings.Footnote ¹⁷

He was, however, not a man of formal logic. His contributions were seldom about general theory but were, rather, concerned with specific topics, treated with solid common sense mixed with a deep doctrinal knowledge. He was, no doubt, aware of this because he acknowledged he had not been able to build a general theoretical framework regarding public finance. Moreover, by 1942, it seems he was convinced he had outlived the Italian tradition: “Since I flattered myself many years ago to build a manual of public finance upon the simple idea of equality, I must confess that I am now convinced that from our scribbled subject of public finance it is not possible to deduce logically a doctrine by a principle” (Einaudi Reference Einaudi1942a, p. 33). More than that, he stated that studies in public finance “assumed the name of ‘science’ only due to the need to give a name to the university chairs created in Italy in the Faculty of law” (Einaudi Reference Einaudi1942a, p. 36). However, following his reasoning on this point, the conclusion reached is that no scientific value can be given either to his or to general studies in public finance.

In stark contrast to Einaudi, Sensini (who was only five years younger than Einaudi) was the strictest follower of the Paretian methodology (Fossati forthcoming), in both its economic and sociological dimensions. From the beginning, Pareto encouraged him to continue in the study of economics and sociology, because he was particularly impressed by his first study “Le variazioni dello stato economico in Italia,”Footnote ¹⁸ which Pareto praised for its ingenuity and for the richness of “statistical data, well positioned, perfectly interpreted, and such as to be quite useful to the scholar” (Sensini Reference Sensini1948, p. 1). In fact, on 8 December 1906, Pareto asked him to collaborate on the second edition of the Cours, planned in five volumes, two of which (regarding applied economics) had to be developed from statistical data by Sensini.Footnote ¹⁹ This joint project was discussed in many of Pareto’s letters during 1907 and 1908, but Sensini’s role never changed. On 8 September 1908, Pareto wrote: “you have mainly to deal with the parts which need a lot of statistical data” (Sensini Reference Sensini1948, p. 41). This proposal was cursorily anticipated in the letter dated 9 April 1905—the same letter in which Pareto made a harsh comment about the Scienza delle Finanze, and in which he encouraged Sensini to study public finance.

Notwithstanding this, it is my contention that Pareto was not very keen to encourage Sensini in his studies of public finance. Until 1917, Sensini’s interest actually remained in economics and sociology, always with Pareto’s approval. On 6 March 1906, Pareto wrote: “If they are going to create university chairs in Sociology, it seems to me you should try to get one of them” (Sensini Reference Sensini1948, p. 14); and again on 20 October 1906: “I have read with pleasure your booklet on Sociology. It seems to me a good work. It is good for you to go on studying that science, and you did quite well in accepting a lecture in Sociology” (Sensini Reference Sensini1948, p. 22).

It was only in 1917 that Sensini published two articles that treat the general problems of public finance in a strictly Paretian manner. The first one (Sensini Reference Sensini1917a) is a first outline regarding the determination of the public expenditure; in the second one (Sensini Reference Sensini1917b), he gives a general idea of the problems regarding the effects of taxation. One may wonder why he decided to write on public finance; in my opinion, the reason for this appears to concern only the possibility of obtaining a university chair. On 5 April 1917, Pareto wrote to Sensini: “I would say it is good for you to publish a book on the scienza delle finanze, as you are telling me, even if it is like sailing in a sea full of rocks; however, they can be avoided with much prudence and skill” (Sensini Reference Sensini1948, pp. 100–101). It seems that the rocks were cleverly avoided, because in 1919, Sensini won the academic competition for the Chair of Public Finance at the University of Camerino, which was the university where he had graduated and lectured. In congratulating him on 12 September 1919, Pareto remarked significantly: “In that science, you will have less opposition than in Political Economy” (Sensini Reference Sensini1948, p. 124).Footnote ²⁰

In the next year, Sensini produced other public finance works: i) on the Ricardian equivalence between taxation and public debt (Sensini 1920b); ii) on the general classification of fiscal studies (Sensini Reference Sensini1920c; 1920d); and iii) on modifying the equations of general equilibrium to introduce fiscal considerations (Sensini 1920a). In the following year, on 30 June 1921, Pareto wrote: “I have your important study on Financial Law,[Footnote ²¹] which I hope will be of help for the aim you have in mind. Perhaps the Scienza della finanza in Italy has better judges than those who throw their weight around in Political Economy” (Sensini Reference Sensini1948, p. 132).

Apart from partial revisions of previous studies,Footnote ²² this is the end of Sensini’s work on public finance. A possible explanation could be that Sensini had to write further on public finance in order to have his university Chair of Public Finance confirmed. However, he seems to have encountered some difficulties, because on 30 November 1921, Pareto wrote: “I am quite displeased about what you are telling me but, unfortunately, I am not surprised [about the result of an academic competition].… Go on working, and don’t care what they think. It seems to me that now you can go back to Economics. But perhaps some lively criticism of what in Italy they call the Scienza delle finanze would be good” (Sensini Reference Sensini1948, pp. 133–134).

It is at that stage that Sensini’s interests turned back to political economy, although he retained an interest in economic demography and sociology. At the end of 1922, he unanimously won the competition for the Chair of Political Economy at the University of Sassari. After one year in Sassari, he came back to his University of Camerino, and then in 1929, he finally settled at the University of Pisa with a Chair of Political Economy.Footnote ²³

Griziotti was five years younger then Sensini. He stated he had been a pupil of Montemartini,Footnote ²⁴ Benini, and Pantaleoni, but that, owing to the fact he had attended courses at the University of Lausanne, his “scientific consciousness” was formed by Pareto’s teaching, not only academically but “in his Céligny country house, for a whole afternoon each week … in long discussion about economic and sociological topics, and especially about the methodology of science” (Griziotti Reference Griziotti1949, p. 122). His training included calculus (Griziotti Reference Griziotti1949, p. 122), but, in his words: “I neglected to use mathematics in public finance, although I admit that it is fundamental if used with sparing prudence” (Griziotti Reference Griziotti1949, p. 123).

However, some of his ideas of mathematics in public finance appear ambiguous, especially his basic ideas concerning indifference curves. When writing to Einaudi about Barone’s proof of the theorem on the excess burden of indirect taxation, he says: “I have asked a mathematician friend of mine, and he told me that everything depends on the concavity of the curves. If they were convex [here two convex lines are drawn], the proof is invalid. Do you think that indifference curves may be convex?” (Griziotti’s letter to Einaudi, 11 May 1932, now in the Fondazione L. Einaudi archive).Footnote ²⁵

For the purposes of this paper, though, the important point is that Griziotti’s approach to public finance is not close to that of the Paretian methodology—even though he self-identified with that approach. Rather, it represents something of a political science of public finance, with prominence given to the political and juridical aspects of fiscal decisions. For Griziotti, “the point of arrival of financial sociology is the point of departure of the science of finance intended as political science” (Griziotti Reference Griziotti1949, p. 125). Pareto regarded him as a friend, probably owing to his visits to Céligny, mentioned above, but did not hold his studies in high regard. In fact, he wrote to Sensini on 9 September 1917: “it is not his fault, but that of his masters, that such studies [Griziotti’s] are unfounded, because they can be built only upon the knowledge of the effects of a measure (in this case, tax or debt) on economic and social equilibrium” (Sensini Reference Sensini1948, p. 107).

Of course, like all major scholars, Griziotti’s thought on public finance evolved over time. In his early years, he had reached the view that public finance may be characterized as a multidisciplinary field, with economic analysis being only part of a broader approach that also comprises financial law and political science—although the political aspect of the fiscal phenomenon is considered predominant.Footnote ²⁶ His school was influential at his time, and he had many pupilsFootnote ²⁷ who certainly took benefit from his teaching; nevertheless, the economic aspect of public finance is predominant in D’Albergo (1902–1974) (originally Borgatta’s pupil), Pesenti (1910–1973), Parravicini (1910–2001), Steve (1915–2006) (originally Tivaroni’s pupil), and Forte (1929).

In 1943, Griziotti was convinced that “the renewal of the scienza delle finanze has been going on [since 1917] and it is now in great part accomplished, overcoming the very doctrinal signposts of P[areto]” (Griziotti Reference Griziotti1943, p. 138). His idea is that the analysis must be performed in the juridical-political sphere: “The State is the active subject of finance, in its fundamentally moral and political nature; it is the natural reference to which the science of finance has to look for its scientific renewal” (Griziotti Reference Griziotti1943, p. 138). In Griziotti’s mind, this renewal not only overcame Pareto’s objections to the study of public finance, it also replaced the approach presented by Pareto. The net effect was to obscure both the economics of public finance and the sociological approach to finance sponsored by Pareto. Griziotti argues that “the scientific method I learned at the school of Vilfredo Pareto has prevented me from following the Maestro uncritically” (Griziotti Reference Griziotti1949, p. 124). In fact: “the renewal of the scienza delle finanze overtakes and includes the sociological financial approach of Pareto” (Griziotti Reference Griziotti1949, p. 127). Griziotti may be quite right. It is clear, however, that he is positioned well outside any possible Paretian influence. At any rate, this branch of the Italian tradition was to end with Griziotti’s death.

Borgatta was fourteen years younger than Einaudi, and, after graduating with him at the University of Turin, he went to Lausanne, where he came to endorse Paretian methods, both economic and sociological. He was a competent mathematician, though he was less inclined to formal constructs than Sensini, perhaps because he maintained a close relationship with Einaudi, who was a literary economist. He succeeded in presenting a framework for a sociological theory of public finance along Pareto’s line in Borgatta (Reference Borgatta1912) and (1920), the latter of which is perhaps the single most important study of public finance in the Paretian tradition. The purpose of this study was to define the scope and methods of fiscal studies, and, in doing so, it effectively outlined a path for future scientific studies of the fiscal phenomenon to proceed. The curious thing, however, is that Borgatta did not follow up on that study. Apart from general theorizing, much of his research was geared to more concrete public finance topics, where he used economic methodologies, ostensibly against Pareto’s suggestion of using sociological methodology for such topics. However, as shown in Fossati (forthcoming, §4), he did manage to reconcile such research with his Paretian faith, because Borgatta’s coherence seems proved by his dualistic distinction between “sociological problems” in public finance and “financial economic problems” in public finance. While the former problems necessitate sociological methodologies, for some of the latter problems, sociological processes are not particularly revealing. In those cases, albeit in a first approximation, the analysis may be based on pure economic assumptions, but this is tantamount to saying that the analysis is “applied economics” within the Paretian meaning of the phrase.

From the general standpoint, he realized that the world was evolving and that financial problems were changing, but he stood by his original Paretian methodology, even though it is correct to say that, over time, he concentrated mainly on analyzing single topics, leaving methodological qualms aside. In 1934, he stated: “The war not only brought about new financial policy patterns, but emphasized the change of the State with respect to the private economy and, in many respects, conditioned the phenomena that are more directly connected to the general theory” (Borgatta Reference Borgatta and Borgatta1934, p. viii). Fifteen years later, in his last article, he restated that “the consequences of World War I, the Russian Revolution, the Great Depression 1929–35 and, finally, the recent war” brought about “a big change in the proposed ends, in the form and in the structure of public finance, linked to the change in the political powers and in the governing groups,” which, in turn, “created in the theory of public finance new doubts and critiques about the ‘hedonistic’ or ‘economic’ explanation of public finance, about the theories that consider financial phenomena as an extension or a specific expression of the general laws of economics” (Borgatta Reference Borgatta1949, p. 1).

For Borgatta, the heart of the matter is that real fiscal phenomena have undergone great changes, which have distanced them considerably from the almost static conditions that, in the last decade of the nineteenth century, could have given a semblance of plausibility to De Viti’s or Einaudi’s approaches, or more generally to the Italian tradition founded on marginalism. Thus, Borgatta confirms his initial Paretian position, which explicitly claims that the marginalistic branch of the Italian tradition had come to an end. However, Borgatta realized that the sociological branch, born with him in the early twentieth century, was not developed sufficiently to provide plausible explanations of fiscal phenomena. For this reason, in the 1949 article, Borgatta tried to move towards a further politico-sociological approach. He started proposing a politico-sociological reading of the changes undergone by the public financial systems in the twentieth century. The aspects he considered are: i) the change in the ends and role of taxation; ii) budget policy, and its very form; and iii) public debts and the use of monetary inflation for financial ends (Borgatta Reference Borgatta1949, p. 6). The starting point is the “liberal State”; the next phase is State interventionism; and the last phase is nationalization and State economic planning. The order is “not so much from the chronological point of view, but rather considering the prevalent characteristics in the organization and in the activity of public finance” (Borgatta Reference Borgatta1949, p. 6).

This is no place for an in-depth analysis of the points outlined, which were “intended for further elaboration” (Borgatta Reference Borgatta1949, p. 1). I venture to comment, however, that while these notes surely present some novelty with respect to Borgatta’s original framework, they nonetheless maintain a provisional character of a research program that is intended for further analysis. Unfortunately, this program never was developed because Borgatta died a few months later, and no one subsequently embarked on developing that program. As a result, this branch of the Italian tradition in public finance came to an end with the death of Borgatta.

Murray was born in the same year as Borgatta, but it is more difficult to derive a satisfactory overview of his contribution because the career path he followed was broken into three distinct periods. In the first period, between 1909 and 1919, his books and articles in the Giornale degli economisti are interesting and insightful. In brief, he kept swinging between Pareto and a politico-economic approach of his own, which recalls Conigliani’s political approach to public finance. Nothing at all is known of the second period, which lasted for more than thirty years, from the end of World War I to 1951. In regard to the third period, all that is known is that he taught at the University of Pisa after Sensini’s retirement, but not as a full professor, and in a different faculty.Footnote ²⁸ However, he did publish a last article in the Giornale degli economisti, and a textbook, which is quite similar to the ones he had published thirty years before. In the article (Murray Reference Murray1953), he essentially elucidated his work at the beginning of the century, but he also pointed out that, while he still held Pareto in high esteem, he advocated the political approach to public finance.

In regard to the first of these three periods, Pareto’s letters to Sensini provide us with some insight into Pareto’s views on Murray’s work. Firstly, Pareto expressed a stern negative comment, then a warm-hearted appreciation, and finally a detached and total indifference. On 27 October 1909, Pareto wrote to Sensini: “A Sig. M. from Florence sends me a work[Footnote ²⁹] of his about ‘value as pure concept etc.’, in which he talks of you [Sensini] and of me…. The Author, in the book, talks of me badly, and sends the book to me with a letter and a very kind dedication.… Sig. M. does not understand anything, anything at all, about economic theories” (Sensini Reference Sensini1948, p. 45).Footnote ³⁰ Sensini adds: “Please note that, after that, the same author studied Pareto much better and understood him.” This comment is consistent with one of Pareto’s subsequent letters, dated 20 June 1910: “Sig. M. published in the Voce dated 16 cur. a very good article about my works. It seems that now he has well understood the methods and the significance of the new economics” (Sensini Reference Sensini1948, p. 51). Three years later, however, on 3 January 1913, Pareto wrote: “I had a look at the book of Sig. M. He wants to have the best of both worlds, probably due to his desire to obtain a university chair. I hope he will succeed in his aim: but I lack the time to take an interest in such a clever strategy, which takes place outside the field of science” (Sensini Reference Sensini1948, p. 82). On the other hand, in 1920, Borgatta devoted quite a long note to a critique of Murray’s approach, in which he remarks that Murray considers “the State and its activity as a system of logical actions, aimed at satisfying the maximum of the needs of the public institution” (Borgatta Reference Borgatta1920, p. 11). This political characterization of the State as a logical entity is really a very long way from Pareto’s non-logical characterization of the political process. Basically, having Pareto’s pre-Trattato di Sociologia Generale works as a starting point, Murray then turned back to Conigliani and away from Pareto’s sociology (and later away from both Pareto and Conigliani).

IV. PARETO’S INFLUENCE ON THE LAST GENERATION

Fasiani (1900–1950), D’Albergo (1902–1974), Da Empoli (1904–1948), Fubini (1904–1944), and Cosciani (1908–1982) are readily included in the third and final great generation of the Italian tradition in public finance. However, only a few words will be devoted to Da Empoli and Fubini here, as they both died quite young so their influence was limited.Footnote ³¹ In contrast, D’Albergo and Cosciani lived and worked into the second half of the twentieth century, outliving the Italian tradition, which, we contend, came to an end in the middle of that century. Thus, only a few comments are made on both of them concerning, in general, their activity before 1950. This section is devoted primarily to Fasiani, who was the outstanding figure in his generation.

Fasiani received the Paretian heritage in a most constructive way. After serving in the army in the last year of World War I, he graduated from the University of Turin with Einaudi. Then, he started working with him at the same university with some other of Einaudi’s pupils, the most brilliant of whom was certainly Borgatta. In my opinion, Fasiani became interested in the Paretian approach through Borgatta’s influence, who was ten years his elder, and was then starting his academic career.

While he did not belong to the sociological school of public finance most often associated with Pareto, my contention is that his methodology was Paretian in all the essential ways. In support of this, I cite the following quotes, which are clearly Paretian in character: there is a “need for a clear separation between science and politics, science and morals, science and arts,” and a need to negate any “scientific value to judgements of good and evil as regards economic phenomena and institutions,” and “to assume, vis-à-vis the facts we study, the same position as the physicist, or the mechanic vis-à-vis their problems” (Fasiani Reference Fasiani1949a, p. 67). He had grasped the ideas of the distinction between non-logical and logical action, of residue and of derivation, and used them together with Puviani’s notion of fiscal illusion to build a viable framework for his economic analysis of public finance. Like Pareto, he abandoned the traditional concept of public need, accepting Barone’s definition of public need insofar as it was satisfied by a public subject.

Moreover, his economic methodology was certainly Paretian, not only in terms of general equilibrium and ordinal indifference curves, but also in the idea of studying intermediate states of economic equilibriums to introduce time in a manner that aligns with Paretian thought on the matter. However, it must be remembered that his mathematical training was not comparable with that of Pareto’s, so his reasoning was limited to the use of graphs or numeric tables, the latter especially when discussing the double taxation of savings or estate taxation.

While accepting the general Paretian framework, he carries out his economic analysis using any helpful sociological tool, and contributes significant developments towards a financial theory that, indeed, is not sociological, but is as near as possible to the Paretian world. For example, the definition of his polar cases of State is not only based on the Paretian constructs of maximum utility “for” and “of” the community,Footnote ³² but might even be considered broadly consistent with the Paretian approach. If (by assumption) the government’s actions are aimed at achieving a maximum for the community (i.e., economic efficiency), sociological behavior may be excluded, and the analysis must be made under a strict economic hypothesis along the lines envisaged by Fasiani.

In 1949, Fasiani was convinced that current literature had not accepted the Paretian message as regards the maximum “for” or “of” the community, both in Italy and abroad. He noted that the international doctrine was “still grounded in Sax’s and Seligman’s hedonistic doctrines” (Fasiani 1949b, p. 298), since “the fiscal phenomenon is supposed to be a voluntary economic phenomenon, and single individuals are supposed to seek and reach in it a maximum of ophelimity, which otherwise they could never achieve” (Fasiani 1949b, p. 298).

As regards the Italian doctrine, Fasiani was convinced that the Paretian message had not been accepted because of two reasons. The first was that the De Vitian approach was intended as the theory of the tendential fiscal phenomenon, and not as an extreme case, so that “they lean therefore towards the same optimistic doctrines that are current abroad.” The second reason is that “many believe Pantaleoni’s classification [of individual and collective hedonistic maxima] to be sufficient to the goals they set themselves” (Fasiani 1949b, p. 298).Footnote ³³

I would argue that neither reason was particularly relevant for the typical studies carried out by the Italian tradition of his time. In order to study the economic effects of taxation, or of public debt, there is no need to use Pantaleoni’s hedonistic maximum or the De Vitian cooperative or monopolistic State. Perhaps, Fasiani really had in mind the building of a general framework for the financial phenomena. It is true that, at the time, he was the last scholar still working on it.Footnote ³⁴ In this way, it becomes easier to understand his reference to the hedonistic doctrines and to the De Vitian framework when speaking about Pareto’s maximum for and of the community. The suspicion is that Fasiani was still arguing with Einaudi, who had criticized the Principii di Scienza delle Finanze on the grounds that it did not succeed in building a general framework for the scienza delle finanze. Footnote ³⁵

The Principii di Scienza delle Finanze (Fasiani Reference Fasiani1941) may or may not, depending on the point of view, be considered to have accomplished its author’s ambitious task of building a general unified framework for the theory of public finance.

At any rate it is suggested here that it represents the highest point of evolution of the general theory of public finance in the Italian tradition, considering that its characterizing features are:

1. i) from the assumption of polar cases of State, a number of logical developments follow that give a unitary character to the whole analysis of the single aspects of public finance;

2. ii) the economic analysis of the effects of public action being carried out by bypassing the Paretian critique, as was suggested above for Borgatta;

3. iii) the Paretian characteristic of excluding value judgments from reasoning;

4. iv) the fact that there is no solution of continuity with the thought of the preceding scholars of the Italian tradition, as proved by the constant critical discussion of previous contributions;

5. v) the pragmatic approach, which allows obstacles to be overcome without any ad hoc assumptions that lead far from reality;

6. vi) the fact that descriptive aspects of the financial system are excluded, unlike other previous Italian manuals.

With the exception of Einaudi, who, as mentioned above, while appreciating the single components, negated Fasiani’s general construction, the Principii had quite a promising reception, attested to by the good review articles by Ricci (Reference Ricci1942), Tivaroni (Reference Tivaroni1942), Capodaglio (Reference Capodaglio1942), De Pietri Tonelli (Reference De Pietri Tonelli1942), Griziotti (Reference Griziotti1941), and D’Albergo (Reference D’Albergo1942). However, World War II was raging, northern Italy was going under German occupation, and Fasiani was in bad health. All these adverse circumstances possibly acted to prevent the publication of the book’s being an epoch-making event. At any rate, his second edition, published after Fasiani’s death, in which he had revised the first volume only, was used only locally; the two manuals used in Italy by the post-war generations were the ones written by Cosciani and Steve, both of which were from outside the Italian tradition, except for fleeting allusions. We do not know what the evolution of the scienza delle finanze could have been if Fasiani had lived longer, as his research program was halted, and the branch of Italian tradition he represented did not outlive him.

Cosciani was Fasiani’s “pupil at the beginning of my studies” (Cosciani Reference Cosciani1950, p. 919), but remained more under the influence of Pantaleoni than that of Pareto. His scientific path started from the Italian tradition, where he contributed to problems concerning general public finance by reviving coactive orders, as opposed to contractual orders, which are the subject of political economy. Financial phenomena come to light in a political setting, basically seen in terms of relationships between “strong” and “weak” inspired by Pantaleoni (Reference Pantaleoni1898). In his coactive orders, Cosciani assumes that the governing class makes public choices on the basis of its own collective utility function, which is directed “to obtain those ends that cannot be reached in a contractual order owing to the more limited economic horizon of individuals with respect to that of the governing class, or due to the diverging interests of the individuals that belong to the community” (Cosciani Reference Cosciani1977, p. 32). Such a utility function seems much nearer to Pantaleoni’s than to Pareto’s maxima; as a first approximation, like Pigou, he assumes that collective welfare can be regarded as coincident with national income. Thus, there is some distance between the analytics of the Paretian world and those of Cosciani, though, like Pareto, Cosciani achieves his end without relying on the concept of public need.

Like the other scholars of his generation, Cosciani accepted the Paretian economic methodology without going into the analytical details or beyond graphic representation. While he was not an advocate of Pareto’s sociological methodology, he nevertheless remarked on “the advantages of acknowledging, for the theoretical representation of financial phenomena, the ‘non-logical’ character of the financial uniformities” (Cosciani Reference Cosciani1950, p. 915). But apart from his early studies, his research was geared more towards understanding concrete topics than abstract problems, and, in that respect, his approach was much closer to Einaudi, with whom he shared the conviction that the scienza delle finanze had been dead for some time,Footnote ³⁶ than Pareto.

The last scholar taken into account here is D’Albergo, who considered himself the only survivor of the Italian tradition, but his legacy suffered greatly from being ignored by the renewed international interest in the tradition,Footnote ³⁷ which began with Buchanan.Footnote ³⁸ Perhaps Buchanan was, in part, influenced by Griziotti when visiting Pavia in the late 1950s, where he had his university chairFootnote ³⁹: the fact is that D’Albergo was a keen supporter of the economic character of the scienza delle finanze, while Griziotti was on the other side of the fence, as the head of the political-juridical school.

As I showed elsewhere,Footnote ⁴⁰ D’Albergo was sharp in noting that, according to Pareto, the facts concerning public finance had to be inserted in the equilibrium equations, and that analyses regarding changes of that data were part of the Paretian applied economics. D’Albergo also observed that Pareto might “virtually” consider a scienza delle finanze as a subset of applied economics. However, D’Albergo goes further, stating that “with strong probability” he had identified the separate and almost autonomous purpose that Pareto had allocated to the scienza delle finanze, that is

One might completely agree with this “public economics manifesto,” but, on the other hand, it must be said in no uncertain terms that, as far as Pareto is concerned, many of these questions should be investigated by sociology. To the extent that D’Albergo considered such a scienza delle finanze as having an economic character, he was a long way to the Paretian world.

Notwithstanding all this, it is reasonable to conclude that D’Albergo reflected extensively on Pareto’s economic and sociological welfare studies with a view to reducing both to a single economic interpretation.Footnote ⁴¹

V. SOME FINAL REMARKS

In this paper it is shown how Pareto’s methodology was received by specific scholars from within the Italian tradition in public finance; Pareto’s economic and sociological approaches were disseminated among Italian public finance scholars in the early twentieth century. This influenced many scholars, although the extent and nature of that influence varied from individual to individual.

The first concluding point to make is that this extensive influence occurred independently of any direct action of Pareto, because he never worked on public finance and never had anything to do with the Italian tradition in public finance, other than to express harsh judgments on its supposedly ‘scientific’ character.

Secondly, irrespective of whether we consider the first, second, or third generations of the Italian fiscal tradition, the Paretian message had a polarizing effect: some welcomed it and let it influence the structure of their scientific work; others were opposed to it, with varying degrees of hostility. Among the first generation, the reaction to Pareto’s ideas was most tenuous. It was among the second generation that some scholars (mainly Sensini and Borgatta) attempted to develop and implement a Paretian methodology to the study of public finance in which the ‘economic’ and the ‘sociological’ aspects of the fiscal phenomenon were isolated and studied separately. It was not until the third generation, under the influence of Fasiani, that the main sociological influences that Pareto identified were noted but set beside a general analytical framework primarily based on an economic approach to fiscal studies.

In the first generation, Flora and Graziani remained indifferent, with only Barone fully appreciating the Paretian economic methodology, even if he considered Pareto’s sociology as not being viable for the study of fiscal phenomena. Pantaleoni was also deeply involved, but he was caught between his friendship for Pareto and his commitment to the hedonistic and Marshallian approach to economic and fiscal theorizing. After Sensini’s review of the Manuale, it appears that Pantaleoni came to perceive choice theory as an attack on his preferred hedonistic approach, and thus he came to oppose sternly and openly the Paretian methodology as a by-product of his criticisms of Sensini. Also, De Viti did not accept the main character of Pareto’s message, partly because he too was proposing an approach to public finance based on hedonism and on marginal analysis. On the other hand, he realized the significance of the general equilibrium approach, which came to mark De Viti’s treatment of the effects of taxation in the post-political phase of his career.

In the second generation, Einaudi formally praised Pareto, but always maintained a personal approach that was antithetical to the Paretian methodological revolution, one based more on what he regarded as common sense than on the experimental and eclectic approach advocated by Pareto. He conceived an ethical State, which, in large part, was devoted to the production of goods and services useful to the community. For him, moral values influence scientific reasoning, while value judgments have a significant role to play in the interpretation of facts in the social sciences. From that angle, he held an idea of science almost the exact opposite to that held by Pareto.Footnote ⁴² Furthermore, being a literary economist, he was untouched by the mathematical dimension to the general Paretian methodology on economic matter.

In stark contrast, Sensini was really a full Paretian social scientist, interested both in economics and sociology. While his commitment to public finance was accidental, to a considerable extent, it nevertheless afforded him the opportunity to study the fiscal phenomenon from both economic and sociological perspectives, along the lines advocated by Pareto, while also providing him with the opportunity to pursue a university career.

Griziotti is remembered as the founder of the political-juridical school within the Italian fiscal tradition, but this world was far removed from that envisaged by Pareto. Borgatta extended the Paretian analysis of fiscal policies, using economics to go well beyond that which Pareto regarded as legitimate; however, his coherence seems proved by his clear enunciation of the distinction between sociological problems and financial economic problems. As some of the issues that fall under the latter heading may be considered as applied economics (at least in the Paretian meaning of the phrase, as used in his Cours), Borgatta’s economic analysis of fiscal phenomena may be regarded as legitimate from a Paretian perspective. At any rate, it is clear that Borgatta’s analysis was strictly Paretian as far as the general problem of public choices is concerned, and, in view of this, he is generally considered the founder of the sociological school within the Italian fiscal tradition for his major works of 1912 and 1920. However, his thinking on fiscal matters evolved over time, and, in his last article, written in 1949, appeared to move towards a more politico-sociological approach because he proposed a provisional politico-sociological reading of the changes undergone by the public financial systems during the twentieth century.

Murray, too, reflected elements of Paretian thinking in his treatment of public finances, but earlier and more forcefully than Borgatta, he replaced the sociological approach advocated by Pareto with a political approach, although when he considered the economics of public finance, he derived it directly from Pareto’s welfare analytics.

In regard to the third generation, Fasiani was the single most outstanding scholar: he is the scholar who received the Paretian heritage in the most critical but beneficial way. He did not belong to the sociological school—so a clear break is evident between Fasiani and the Paretians from the second-generation scholars like Sensini and Borgatta—but he endorsed Pareto’s scientific methodology as regards the need for a clear separation between science and politics, science and morals, science and arts. Like Borgatta, he explored specific financial topics using economic assumptions only, using a Paretian economic methodology, from the general equilibrium approach to the choice theory. But Fasiani’s research program also extended to offering a general theory of public finance, building on the definition of cooperative, monopolistic, and tutorial states, based on Paretian maxima for and of the community, intended as polar cases. The end result is that his framework for the analysis of fiscal matters represents the highest point of evolution of the Italian tradition’s general theory of public finance. Importantly, even when Fasiani’s analysis utilizes concepts from within Pareto’s sociological framework, it is done so with the intent of extending economic analysis. For example, the Pareto notion of non-logical actions was merged with Puviani’s fiscal illusion in a manner that contributed to significant developments towards an economic theory of public finance. It is not a sociological theory of public finance that is demanded, but an economic theory of public finance that captures sociological influences Pareto considered important. Indeed, the sociological imprinting does not interfere with, but actually enriches, Fasiani’s general theory of public finance.

Finally, as regards Cosciani and D’Albergo, Cosciani used some elements of the Paretian economic methodology, but, like most of his generation, did not accept the sociological framework, while D’Albergo was more familiar with Paretian economics than sociology, and was convinced that public finance could be considered under economic assumptions only.