Pareto’s judgment was clearly influenced by his political prejudices: he was above all wary of
socialists and what he took to be their redistributive illusions. In this respect he was hardly different
from any number of contemporary colleagues, such as the French economist Pierre Leroy-Beaulieu,
whom he admired. Pareto’s case is interesting because it illustrates the powerful illusion of eternal
stability, to which the uncritical use of mathematics in the social sciences sometimes leads. Seeking to
find out how rapidly the number of taxpayers decreases as one climbs higher in the income hierarchy,
Pareto discovered that the rate of decrease could be approximated by a mathematical law that
subsequently became known as “Pareto’s law” or, alternatively, as an instance of a general class of
functions known as “power laws.” Indeed, this family of functions is still used today to study
distributions of wealth and income. Note, however, that the power law applies only to the upper tail
of these distributions and that the relation is only approximate and locally valid. It can nevertheless
be used to model processes due to multiplicative shocks, like those described earlier