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What is The Pareto principle

The Pareto principle

There are many complicated things involved in people’s life. Understanding the general population statistics of different categories is a complicated task even for the most renowned philosophers. There is a famous principle that helps many companies and gurus that can help understand some of the main social statistics.

Who is Vilfredo Pareto

Vilfredo Pareto was born in 1848 in Paris. His father was a civil engineer. He lived in the middle-class and had received a high standard of education. He earned a doctor’s degree in engineering. He had an interest in the equilibrium in economics and sociology. Pareto was a civil engineer, sociologist, political scientist, philosopher and economist. He made important contributions to many different fields including economics. Vilfredo Pareto introduced the Pareto efficiency. The Pareto distribution or principle was named after him.

What is the principle

This is a very interesting principle, it helps in many different fields such as economics, computing, sports, and other applications. The principle which has been made in late 1800 by Vilfredo Pareto, states that for many outcomes around 20% of the causes are contributing for 80% of the consequences. Pareto noted this observation first while at University of Lausanne in 1896, he stated that approximately 80% of land in Italy was owned by 20% of the population.

Where can the Pareto principle be applied?

In economics – first Pareto noticed the distribution of land in his country, Italy. Later he surveyed other countries and found out that the principle applies even at different countries. The principle also applies to taxation, for example 20% of the top earners in USA pay around 80% of the federal income taxes in 2000.
It also hold true in wealth distribution. For example, the income distrubution in the upper class of the population also follows Pareto’s principle.

In computing – an example of the principle in computing is a news from Microsoft that when they fixed the top 20% of the most reported issues, 80% of the errors and crashes were eliminated. Other people noticed that 20% percent of the code has 80% of the errors. Another example is that 80% of a software can be written in 20% of the time of the total project time.

In sports – there are many examples that athletes that are among the top, often take the majority of the winnings. Another example in sports is that 20% of the exercise that athletes perform has 80% of the impact of their performance.

Quality control – the principle can be applied when reassuring the quality of an item. Under the principle different problem areas are classified according to their degree of importance.


Conclusion

The principle is rather interesting topic. It has been discovered long time ago, and it is used for many different purposes in various areas nowadays. It can be noted that the principle can help explain many different situations and events in different areas.