Pareto principle

The Pareto principle (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes. Management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who noted the 80/20 connection while at the University of Lausanne in 1896, as published in his first work, Cours d'économie politique. In it, Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population. The Pareto principle (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes. Management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who noted the 80/20 connection while at the University of Lausanne in 1896, as published in his first work, Cours d'économie politique. In it, Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population. It is an axiom of business management that '80% of sales come from 20% of clients'. Mathematically, the 80/20 rule is roughly followed by a power law distribution (also known as a Pareto distribution) for a particular set of parameters, and many natural phenomena have been shown empirically to exhibit such a distribution. The Pareto principle is only tangentially related to Pareto efficiency. Pareto developed both concepts in the context of the distribution of income and wealth among the population. The original observation was in connection with population and wealth. Pareto noticed that approximately 80% of Italy's land was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied. A chart that gave the inequality a very visible and comprehensible form, the so-called 'champagne glass' effect, was contained in the 1992 United Nations Development Program Report, which showed that distribution of global income is very uneven, with the richest 20% of the world's population controlling 82.7% of the world's income. The Pareto principle also could be seen as applying to taxation. In the US, the top 20% of earners have paid roughly 80-90% of Federal income taxes in 2000 and 2006, and again in 2018. However, it is important to note that while there have been associations of such with meritocracy, the principle should not be confused with farther reaching implications. As Alessandro Pluchino at the University of Catania in Italy points out, other attributes do not necessarily correlate. Using talent as an example, he and other researchers state, “The maximum success never coincides with the maximum talent, and vice-versa.”, and that such factors are the result of chance. In computer science the Pareto principle can be applied to optimization efforts. For example, Microsoft noted that by fixing the top 20% of the most-reported bugs, 80% of the related errors and crashes in a given system would be eliminated. Lowell Arthur expressed that '20 percent of the code has 80 percent of the errors. Find them, fix them!' It was also discovered that in general the 80% of a certain piece of software can be written in 20% of the total allocated time. Conversely, the hardest 20% of the code takes 80% of the time. This factor is usually a part of COCOMO estimating for software coding.