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The Pareto principle (also known as the 80-20 Rule, the law of the vital few and the principle of factor sparsity) 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 M. 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. It is often applied to data such as sales figures (20% of clients are responsible for 80% of sales volume) or organizational productivity applied via aircraft bodies whereby 20% of an aircraft structure provides 80% of the lift (in turn would apply to 20% of individuals in an organization perform 80% of the work).

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

The Pareto principle is unrelated to Pareto efficiency, which was also introduced by Vilfredo Pareto.

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Topics: Pareto Principle, Pareto Index, Pareto Efficiency...

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Pareto distributionThe Pareto distribution named after the Italian economist Vilfredo Pareto is a power law distribution found in a large number of real-world situations. This distribution is also known, mostly outside economics, as the Bradford distribution''. If X is a raPareto interpolationPareto interpolation is a nonlinear method of interpolation to find the median of a set of data. It is used in economics when analysing income figures. It assumes that the data fits a curve known as the Pareto distribution. The median is given by : wherePareto analysisPareto analysis is a statistical technique in decision making used for selection of a limited of number of tasks that produce significant overall effect. It uses the Pareto principle the idea that by doing 20% of work you can generate 80% of the advantage
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