
related topics 
{rate, high, increase} 
{theory, work, human} 
{math, number, function} 
{company, market, business} 
{law, state, case} 
{math, energy, light} 
{@card@, make, design} 
{system, computer, user} 
{style, bgcolor, rowspan} 

The Pareto principle (also known as the 8020 rule,^{[1]} the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.^{[2]}^{[3]}
Business management thinker Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population; he developed the principle by observing that 20% of the pea pods in his garden contained 80% of the peas.^{[3]}
It is a common rule of thumb in business; e.g., "80% of your sales come from 20% of your clients". Mathematically, where something is shared among a sufficiently large set of participants, there must be a number k between 50 and 100 such that "k% is taken by (100 − k)% of the participants". The number k may vary from 50 (in the case of equal distribution, i.e. 100% of the population have equal shares) to nearly 100 (when a tiny number of participants account for almost all of the resource). There is nothing special about the number 80% mathematically, but many real systems have k somewhere around this region of intermediate imbalance in distribution.
The Pareto principle is only tangentially related to Pareto efficiency, which was also introduced by the same economist. Pareto developed both concepts in the context of the distribution of income and wealth among the population.
Contents
In economics
The original observation was in connection with income and wealth. Pareto noticed that 80% of Italy's land was owned by 20% of the population.^{[4]} He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied.
Because of the scaleinvariant nature of the power law relationship, the relationship applies also to subsets of the income range. Even if we take the ten wealthiest individuals in the world, we see that the top three (Warren Buffett, Carlos Slim Helú, and Bill Gates) own as much as the next seven put together.^{[5]}
Full article ▸


related documents 
Standard of living 
Biased sample 
Adaptive expectations 
Statistic 
Stratified sampling 
Allan variance 
Demandpull inflation 
Descriptive statistics 
Pearl Index 
Ratio 
Growth accounting 
Cluster sampling 
Sample (statistics) 
Per capita income 
Health care systems 
PostKeynesian economics 
Works Progress Administration 
Scoville scale 
Extreme value theory 
Mean time between failures 
Net profit 
Interquartile mean 
Deadweight loss 
Norwegian krone 
Range (statistics) 
Malthusian catastrophe 
Robert Mundell 
Kenneth Arrow 
Statistical dispersion 
Standard of living in the United States 
