Pareto Distribution
The Pareto distribution, also known as the 80/20 rule, is a fundamental concept in statistics and economics that describes the unequal distribution of wealth and other phenomena in society. This distribution is named after the Italian economist “Vilfredo Pareto”, who first observed this pattern in the late 19th century while studying the distribution of income in Italy.
History
Vilfredo Pareto noticed that approximately 80% of the land in Italy was owned by 20% of the population. This observation led him to investigate further and discover that this proportion seemed to repeat itself in a variety of contexts, from the distribution of wealth to industrial production.
In 1896, Pareto published his discovery in his work “Cours d’économie politique” thus establishing the basis of what is now known as Pareto’s law or the 80/20 principle.
Practical Applications
The Pareto distribution has been found useful in a wide range of fields. In economics, it helps understand the distribution of income and wealth and is fundamental in the study of economic inequality.
In business management, it is used to identify the most important products or customers, as typically 80% of sales come from 20% of products or customers. In engineering, it is applied to identify and prioritize the…
