Vilfredo Pareto was a 19th century
statistician,
economist, and
sociologist. He is most famous for his discovery that holds true in all
cultures (
agrarian,
technological,
foraging, etc.) that the
distribution of wealth remains at 80-20. Better said that 80% of the
wealth in a
society is owned by 20% of the
people. This is what as known as
Pareto’s Law, and commonly thought of as the “law of the trivial many and important few.” This law however doesn’t stop with the distribution of wealth it can be seen over and over. We are all familiar with the
phenomenon in group projects. 20% of the people end up doing 80% of the work. It is also used in
stock analysis,
engineering, and
consumer spending to name a few.
The actual equation is this:
Let N= the number of employed who have incomes greater than x
A & m are constants
Log N = log A + m log x