Pareto principle

The Pareto principle (also known as the 80-20 Rule and the law of the vital few) states that for many phenomena 80% of consequences stem from 20% of the causes. Moreover, among those "top 20" it is also the case that 80% of consequences result from 20% of causes, and so on. Thus, for example, 20% of 20% of 20% is 0.008, or 0.8%, i.e., eight-tenths of one percent, and 80% of 80% of 80% is 51.2%, so 51.2% of consequences come from eight-tenths of one percent of causes.

The principle was suggested by management thinker Joseph Juran[?]. It was named after the Italian economist Vilfredo Pareto, who observed that 80% of property in Italy was owned by 20% of the Italian population.

This is a special case of the wider phenomenon of Pareto distributions.

See also:

• Sturgeon's Law
• Mathematical economics
• Wealth condensation
• Zipf's law

External resources:

• http://library.shu.edu/HafnerAW/awh-th-math-pareto.htm
• Wealth Condensation in Pareto Macro-Economies (http://www.ma.hw.ac.uk/~des/HWM00-26.pdf)