The Marginalist Revolution in Italy
Marginalist economics first reached Italy as a “complete intruder” according to the economic historian Paul Barucci. The Italian economist Francesco Ferrara’s acclaimed journal, the Biblioteca dell’Economista, translated marginalist pioneers Léon Walras and William Stanley Jevons first in the 1870s, introducing a generation of economists like Maffeo Pantaleoni and Vilfredo Pareto to a new paradigm of economic thought. According to marginalist theorists, the construction of economic valuewas not a static property inherent to things – instead, economic decisions were made by wholly subjective valuators based on their relative judgements for “marginal utility.” As the legendary economist and sociologist Vilfredo Pareto explained, “for a naked person, the first rag that is useful for sheltering him from the cold and bad weather is very precious, the second less so, the third less still, until covering himself more and more, he becomes too hot, and his pleasure turns into pain.” The problem, however, that Pareto and marginalists faced was how to reduce entirely subjective and contextual decisions into numeric, and therefore comparable, values across economic actors.
The solution for Maffeo Pantaleoni in his seminal Principii di economia pura (1888) was the “homo economicus.” As Pantaleoni explained in the first sentence of the book:
“Economic science consists of the laws of wealth, systematically deduced from the hypothesis that humans are moved to act exclusively by the desire to achieve the greatest possible satisfaction of their needs through the least possible individual sacrifice.”
This so-called “hedonistic premise” effectively abstracted away the problem of diverse, subjective desires into one homogeneous presupposition. As Pantaleoni argued, from that basis, a whole “hedonic calculus” could be devised that categorized actions into “negative and positive” poles corresponding to that underlying hedonistic motive. It was this principle that the economist and the second President of the Italian Republic, Luigi Einaudi, believed launched a decades long controversy around the very relationship between economic science, mathematical formulas, and reality itself. Pantaleoni’s Principii was also important for one engineer, Vilfredo Pareto, who coincidently met Pantaleoni on a train ride and soon began a fruitful letter correspondence. It was Pantaleoni who convinced Pareto to contribute to the great Giornale degli economisti, where Pareto would first publish his legendary theories of welfare economics and economic equilibrium only a few years later. Pareto’s distinguished contributions to Italian economics led even Joseph Schumpeter to claim that “the most malevolent observer could not have denied that [Italian economics] was second to none by 1914.”
Homo Economicus in Italian Sociology and Philosophy
To be sure, Italian marginalist economics were not the only ones convinced by the hedonistic thesis. The first promotor of Italian Marxist thought, Achille Loria, wrote in the preface to the English translation of his book, The Economic Foundations of Society (1899), that its wild success reflected his revelation of the “secret to the world… [that] cupidity, narrow, mean egoism and class spirit ruled in our so-called democracies.” Similarly to Pareto, Lorio heavily employed naturalistic language, and he analogized the hedonistic thesis to natural science itself. Loria even described hedonism as “nothing but one of the multiple manifestations of the conservation of energy.” This was not an abnormal comparison in 19th century Italy. The mathematician Vito Volterra, for example, thought “homo economicus” was merely a “natural” fact as obvious as the role of physics (ie., gravity and light) in daily life. Even Vilfredo Pareto, in his Manuale di economia politica (1906), likened rational mechanics to the abstract concept of “homo economicus” in economics.
“Homo economicus” inspired a whole corpus of economic and sociological studies in Italy – but it also drew philosophers into critical exchanges with economists. The great Marxist philosopher, Antonio Labriola, argued marginalists’ concept of hedonism effectively froze a contextual and relative risk assessment into an “eternal attribute of men and things.” Labriola scoffed at the universal “algebra” of the hedonic calculus – not out of principle, but because accurate calculations would only be possible in a Communist society “unimpaired by other social forces.” Indeed, the statistician Rodolfo Benini similarly rejected the hedonic calculus since humans are not perfect calculators. Another philosopher, Benedetto Croce, was the most scathing critics of marginalists, culminating in a public clash with Vilfredo Pareto in the Giornale degli economisti in 1899.
The Question of “Science” in the Giornale degli economisti
Croce attacked the core of “homo economicus”: why not suppose humans were “homo utopian, or rather hetero cosmic, [with a subjectivity] not even found in the constructions of the imagination?” Croce insisted that even if the hedonistic thesis was granted, the concept of value was “sui genesis,” and therefore incommensurable in the first place. The “alleged scale of values… [was] absurd.” Pareto retorted that the concept of hedonism was merely a first principle that facilitated greater inquiry into economic life. According to Pareto, science itself is in “perpetual becoming,” and necessitated baseline assumptions until novel and more accurate theses replaced them.
The debates over “homo economicus” reflected broader disagreements over the possibility of social and historical explanation across Europe. In one of Pareto’s earliest publications in the Giornale degli economisti, he recognized “homo economicus” was a contingent theoretical deduction not entirely “true” to the real world. Still, he insisted it was the only social theory to reach comparable degrees of precision and certainty to natural sciences. To be sure, Pareto deeply explored the distinctions between social and natural theory. By the 1900s, he concluded both sought uniform “laws”that required abstraction and comparison of wholly diverse phenomena – science represented a standard experience (ie., an average eye’s rendition of color or an average ear’s capture of sound). Without the belief of uniformity or at least comparability, Pareto thought one merely fell into Hume’s fork and absolute skepticism of causal connections at all.
Croce radically rejected Pareto’s rendition of science. As he explained in his earliest memoria of his Logica come scienza del concetto puro (1905), “we know apodictically that reality is not constant nor uniform; that it is in perpetual evolution and transformation.” Pareto thought marginalist thought only sliced one cut of reality for study, just like specialized natural sciences such as virology. Croce, however, argued that “slicing” still consisted of a subjective and ultimately arbitrary selection. He continued, it is not “bread and cheese” we’re slicing, but a “series of representations which we have in our consciousness, and into which we can insert nothing except the light of our mental analysis.” Croce insisted, the choice of where we place the knife is the “answer to the problem.”