Warning: this is based upon a single book chapter. I have not read Pareto's original work, hence this post should not be regarded as being in any way scholarly or authoritative.
Vilfredo Pareto is nowadays famous primarily fir his work in economics, but in his day he was a notable authority on eugenics. This field of study has a rather poor reputation nowadays, largely because of the racist and authoritarian ways in which it was put into practice by a wide variety of supposedly civilised governments.
Despite his flirtation in later years with what was to become Mussolini's dictatorship, Pareto cannot be seen as at fault for this. Indeed, his work - as presented in Fransesco Cassata's Building the New Man: Eugenics, Racial Science and Genetics in Twentieth-Century Italy displays a remarkably modern viewpoint. In contrast with the many eugenicists who associated dysgenics with the mixing of the races, Pareto argued that the concept of race, as other eugenicists were using it, lacked any kind of scientific rigour. There might indeed be groups with certain superior qualities - but these groups would be unified by biological processes, rather than through ethnic or linguistic similarities. So accounts of a superior "Latin" or "Germanic" race were unfounded.
Moreover, "that there exist in society men who possess certain qualities in higher measures and saying that there exists a class of men absolutely better than the rest of the population is not the same thing." Variation between humans is undeniable, but this does not imply that the concept of race will turn out to be useful in discussing this even when made properly rigorous.
Pareto further this critique with the observation that perhaps the most obvious manifestations of race come through outward physical characteristics - hair colour, cranial shape, etc. But if race were truly a useful marker, then eugenics would easily be resolved. We may perhaps read into his words the idea that sexual selection would achieve eugenic purposes without any need for deliberate social action.
One of Pareto's most celebrated observations in economics is that, across societies, the distribution of income and wealth tends to follow power laws. In particular he observed that in the Italy of his day, 80% of the land was owned by 20% of the population. (Land ownership is nowadays a poor proxy for wealth, since there is so much more industrial and human capital, but based upon Thomas Piketty's work we might make similar observations about present society). The fact this inequality is natural does not, however, make it desirable.
Indeed, Pareto suggests that this has serious negative consequences for both rich and poor. The working class suffer from a "higher death rate, particularly for infants," while the rich escape this at the price of allowing dysgenics. The babies of the working class who survived would be the more vigorous ones; the upper class would have no such selection.
What was the answer to this? Certainly not compulsory sterilisation of those deemed unfit, which Pareto correctly predicted would lead to horrific abuses (and, incidentally, claimed to be the natural consequence and hence reductio ad absurdam of state socialism). He was in favour of individuals exercising discretion if they feared their children would suffer in life due to hereditary conditions, but was not willing to authorise the state to enforce it. Nor would it help for the élite to have more children - if anything, this would increase the dysgenic processes they were subject to.
Instead, the solution was "circulation of the élite" - social mobility. There are people who can be great in every class: the key was to bring these people into the new élite with every generation. Further to this, Pareto had a theory - though I am uncertain as to how he justified it, and it seems on its face rather strange - that "the fact that the rural classes develop their muscles and rest their brains has precisely the effect of producing individuals who are able to rest their muscles and excessively rest their brains."
This line of argument led him to be fiercely critical of rigid class and caste systems: in particular that of India, which be believed was the cause of their repeated subjugation by a long line of conquerors, of whom the British were only the most recent. This, then, was a eugenics which was firmly within the tradition of liberal individualism, which affirmed the right of every person to be judged by their own ability and virtue rather than that of their group or leader. If only his ideological bedfellows had had the same respect for human dignity, perhaps this would be a topic of genuine debate rather than a shibboleth of the alt-right.
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