In a famous 1900 Rivista article, [Vilfredo] Pareto suddenly changed direction. Heretofore a radical democrat, Pareto now decided to declare himself an anti-democrat. The disturbances of the 1890s in Italy and France led Pareto to realize that, far from restoring true democracy, meritocracy and promoting social welfare, the radical movements were really just seeking to replace one élite with another élite, the privileges and structures of power remaining intact. The struggle was not for a good society, but a squabble among élites over whom exactly was to going to govern. And the ideals and theories they claimed to fight for? Just propaganda, Pareto declared, the way upwardly-mobile folks incite the helpless, hopeless mob to take to the streets on their behalf. For Pareto, humanitarianism, liberalism, socialism, communism, fascism, whatever, were all the same in the end. All ideologies were just smokescreens foisted by "leaders" who really only aspired to enjoy the privileges and powers of the governing élite.

As revealed in the Cours and in his own introduction to an abridged 1893 edition of Karl Marx's Capital, Pareto applauded Marxian theories of class struggle and even thought historical materialism was on the right track (albeit not deep and general enough, in his view). But he deplored Marx's Wizard-of-Oz-like conclusion. For Pareto, class struggle is eternal; the promised "classless" society that would emerge under communism was merely ideological fodder for socialist leaders to lay on their flock. Of course, as a good Neoclassical, Pareto could not fathom the labor theory of value either.

In 1900, Pareto had entered into a brief controversy in the Giornale degli economisti with Benedetto Croce. Croce had criticized economists' positivistic approach, particularly the assumption of "rational economic man". Pareto defended economists, but, at the same time, realized that the conventional defense was not even convincing enough to himself. Why did the predictions of economics fail to correspond to reality? Why were its policy recommendations, to him logically irrefutable, not adopted? The explanation, he concluded, echoing Georges Sorel, was simply that much of human activity was driven not by logical action, but rather by non-logical action. On this, of course, economics has nothing to say — which is why, ultimately, economics will always fail empirically.

One of Pareto's most noteworthy and controversial theories is that human beings are not, for the most part, motivated by logic and reason but rather by sentiment. Les Systemes socialistes is interspersed with this theme and it appears in its fully developed form in Pareto's vast Treatise on General Sociology. In his Treatise, Pareto examines the multitudes of human actions that constitute the outward manifestations of these sentiments and classifies them into six major groups, calling them "residues."

Sabiedrības attīstības virzošais spēks ir neloģiskas rīcības, kuru pamatā atrodas pamudinājumu motīvu, velmju, interešu komplekss, kas sākotnēji raksturīgs cilvēkam. Šo kompleksu Pareto sauc par “nogulsnēm” saprotot ar to, visu, kas paliek pāri, ja no sociālas darbības un domām atdala mazsvarīgo. Bet cilvēkam, sākotnēji, ir nepieciešams savas uzvedības, postfaktum, loģisks pamatojums. Tāpēc, katra neloģiska rīcība obligāti satur “nogulsnējumu” dažādās interpretācijās, kuras izskaidro un tai pat laikā nomaskē to. Šos elementus Pareto sauc par “sastāvdaļām”. Šo “nogulsnējumu” un “sastāvdaļu” klasifikāciju viņš liek sabiedrisko parādību skaidrojumu pamatā. Vēsture ir nepārtrauktas cīņas arēna par varu.

Throughout his Treatise, Pareto places particular emphasis on the struggle within individual men as well as in society between innovation and consolidation. Pareto's "residues" are an extension and amplification of certain aspects of political theorizing set down in the fifteenth century by Machiavelli. Machiavelli divided humans into two classes, foxes and lions. The qualities he ascribes to these two classes of men resemble quite closely the qualities typical of Pareto's Class I and Class II residue types. Men with strong Class I residues are the "foxes," tending to be manipulative, innovative, calculating, and imaginative. Entrepreneurs prone to taking risks, inventors, scientists, authors of fiction, politicians, and creators of complex philosophies fall into this category. Class II men are "lions" and place much more value on traits such as good character and devotion to duty than on sheer wits. They are the defenders of tradition, the guardians of religious dogma, and the protectors of national honor.

The functional relationship between the two is complementary. To illustrate this point, Pareto offers the examples of Kaiser Wilhelm I, his chancellor Otto von Bismarck, and Prussia's adversary Emperor Napoleon III. Wilhelm had an abundance of Class II residues, while Bismarck exemplified Class I. Separately, perhaps, neither would have accomplished much, but together they loomed gigantic in nineteenth-century European history, each supplying what the other lacked.

From the standpoint of Pareto's theories, the regime of Napoleon III was a lopsided affair, obsessed with material prosperity and dominated for almost twenty years by such "foxes" as stock-market speculators and contractors who, it is said, divided the national budget among themselves. "In Prussia," Pareto observes, "one finds a hereditary monarchy supported by loyal nobility: Class II residues predominate; in France one finds a crowned adventurer supported by a band of speculators and spenders: Class I residues predominate." And, even more to the point, whereas in Prussia at that time the requirements of the army dictated financial policy, in France the financiers dictated military policy. Accordingly, when war broke out between Prussia and France in the summer of 1870, the "moment of truth" came for France. Napoleon's vaunted Second Empire fell to pieces and was overrun in a matter of weeks.

Another aspect of Pareto's theories which we shall examine here briefly is what he calls "derivations," the ostensibly logical justifications that people employ to rationalize their essentially non-logical, sentiment-driven actions. Pareto names four principle classes of derivations: 1) derivations of assertion; 2) derivations of authority; 3) derivations that are in agreement with common sentiments and principles; and, 4) derivations of verbal proof. The first of these include statements of a dogmatic or aphoristic nature, for example the saying, "honesty is the best policy." The second, authority, is an appeal to people or concepts held in high esteem by tradition. The third deals with appeals to "universal judgement," the "will of the people," the "best interests of the majority," or similar sentiments. And, finally, the fourth relies on various verbal gymnastics, metaphors, allegories, and so forth.

We see, then, that to comprehend Pareto's residues and derivations is to gain insights into the paradox of human behavior. They represent an attack on rationalism and liberal ideals in that they illuminate the primitive motivations behind the sentimental slogans and catchwords of political life.

We have already noted that when a ruling class is dominated by men possessing strong Class I residues, intelligence is generally valued over all other qualities. The use of force in dealing with internal and external dangers to the state and nation is shunned, and in its place attempts are made to resolve problems or mitigate threats through negotiations or social tinkering. Usually, such rulers will find justification for their timidity in false humanitarianism.

In the domestic sphere, the greatest danger to a society is an excess of criminal activity with which Class I types attempt to cope by resorting to methods such as criminal "rehabilitation" and various eleemosynary gestures. The result, as we know only too well, is a country awash in crime. With characteristic sarcasm Pareto comments on this phenomenon:

Things have come to such a pass that there is hardly a criminal case nowadays where that sort of defense is not put forward. The old metaphysical proof that was used to show that a son should be punished because of his father's wrongdoing was neither more nor less valid than the proof used nowadays to show that the punishment which otherwise he deserves should for the same reasons be either mitigated or remitted. When, then, the effort to find an excuse for the criminal in the sins of his ancestors proves unavailing, there is still recourse to finding one in the crimes of 'society,' which, having failed to provide for the criminal's happiness, is 'guilty' of his crime.

In foreign affairs, "foxes" tend to judge the wisdom of all policies from a commercial point of view and usually opt for negotiations and compromise, even in dangerous situations. For such men profit and loss determine all policy, and though such an outlook may succeed for some time, the final result is usually ruinous. That is because enemies remain capable of appreciating the use of force. In other words, Class I people are accustomed by their excessively-intellectualized preconceptions to believe that 'reason' and money are always mightier than the sword, while Class II folk, with their native common sense, do not nurse such potentially fatal delusions. In Pareto's words, "The fox may, by his cunning, escape for a certain length of time, but the day may come when the lion will reach him with a well-aimed cuff, and that will be the end of the argument."

Pareto considered society a system in equilibrium, where processes of change tend to set in motion forces that work to restore and maintain social balance. Pareto asserts that there are two types of elites within society: the governing elite and the non-governing elite. Moreover, the men who make up these elite strata are of two distinct mentalities, the speculator and the rentier. The speculator is the progressive, filled with Class I residues, while the rentier is the conservative, Class II residue type. There is a natural propensity in healthy societies for the two types to alternate in power. When, for example, speculators have made a mess of government and have outraged the bulk of their countrymen by their corruption and scandals, conservative forces will step to the fore and, in one way or another, replace them. The process, as we have said, is cyclical and more or less inevitable.

Furthermore, according to Pareto, wise rulers seek to reinvigorate their ranks by allowing the best from the lower strata of society to rise and become fully a part of the ruling class. This not only brings the best and brightest to the top, but deprives the lower classes of talent and of the leadership qualities that might one day prove to be a threat. Pareto's irony attacks the elite that becomes humanitarian, tenderhearted rather than tough-minded. Pareto favors opportunity for all competent members of society to advance into the elite, but he is not motivated by feelings of pity for the underprivileged. To express and spread such humanitarian sentiments merely weakens the elite in the defense of its privileges. But few aristocracies of long standing grasp the essential nature of this process, preferring to keep their ranks as exclusive as possible. Time takes its toll, and the rulers become ever weaker and ever less capable of bearing the burden of governing. In the end, of course, the ruling class falls from power. Thus, Pareto writes that "history is a graveyard of aristocracies."

Pareto observed that European democracies in the 1920s were more and more being transformed into plutocracies. The deception and corruption associated with plutocratic rule would eventually produce a reaction, however, and lead to the system's downfall. In Pareto's words:

The plutocracy has invented countless makeshift programs, such as generating enormous public debt that plutocrats know they will never be able to repay, levies on capital, taxes which exhaust the incomes of those who do not speculate, sumptuary laws which have historically proven useless, and other similar measures. The principal goal of each of these measures is to deceive the multitudes.

When a society's system of values deteriorates to the point where hard work is denigrated and "easy money" extolled, where honesty is mocked and duplicity celebrated, where authority gives way to anarchy and justice to legal chicanery, such a society stands face to face with ruin.

There is not perhaps on this globe a single foot of ground which has not been conquered by the sword at some time or other, and where the people occupying it have not maintained themselves on it by force. If the Negroes were stronger than the Europeans, Europe would be partitioned by the Negroes and not Africa by the Europeans. The 'right' claimed by people who bestow on themselves the title of 'civilized' to conquer other peoples, whom it pleases them to call 'uncivilized,' is altogether ridiculous, or rather, this right is nothing other than force. For as long as the Europeans are stronger than the Chinese, they will impose their will on them; but if the Chinese should become stronger than the Europeans, then the roles would be reversed, and it is highly probable that humanitarian sentiments could never be opposed with any effectiveness to any army. (..) Any elite which is not prepared to join in battle to defend its position is in full decadence, and all that is left to it is to give way to another elite having the virile qualities it lacks.

— Les Systemes socialistes

In Pareto's view, the Marxist emphasis on the historical struggle between the unpropertied working class-the proletariat-and the property-owning capitalist class is skewed and terribly misleading. History is indeed full of conflict, but the proletariat-capitalist struggle is merely one of many and by no means the most historically important. As Pareto explains:

The class struggle, to which Marx has specially drawn attention, is a real factor, the tokens of which are to be found on every page of history. But the struggle is not confined only to two classes: the proletariat and the capitalist; it occurs between an infinite number of groups with different interests, and above all between the elites contending for power. The existence of these groups may vary in duration, they may be based on permanent or more or less temporary characteristics. In the most savage peoples, and perhaps in all, sex determines two of these groups. The oppression of which the proletariat complains, or had cause to complain of, is as nothing in comparison with that which the women of the Australian aborigines suffer. Characteristics to a greater or lesser degree real — nationality, religion, race, language, etc. — may give rise to these groups. In our own day the struggle of the Czechs and the Germans in Bohemia is more intense than that of the proletariat and the capitalists in England.

Marx's ideology represents merely an attempt, Pareto believes, to supplant one ruling elite with another, despite Marxist promises to the contrary:

All revolutionaries proclaim, in turn, that previous revolutions have ultimately ended up by deceiving the people; it is their revolution alone which is the true revolution. 'All previous historical movements' declared the Communist Manifesto, 'were movements of minorities or in the interest of minorities. The proletarian movement is the self-conscious, independent movement of the immense majority, in the interest of the immense majority.' Unfortunately this true revolution, which is to bring men an unmixed happiness, is only a deceptive mirage that never becomes a reality.