Pareto Principle question.

[Unclebananahead]

Looking for some help understanding the Pareto principle, in which it's asserted that there's some sort of natural pattern to unequal distributions of wealth, along a roughly 80-20 curve (80% of the wealth held by 20% of the population). Some dipstick brought it out against me on FB.

[PhoenixAsh]

Could you be a bit more specific as to the debate? Because its a rule of thumb abstracted by someone from an economic mathematical principle that Pareto thought up.

You can reverse engineer this rule of thumb in any which way you like.

If someopne argues that 20% of the people will hold 80% of the wealth...you can counter argue that 80% of the people will provide 20% with their wealth.

The principle itself states that there is a natural occuring inbalance in the distribution of a given factor in sufficiently large groups.

[graymouser]

Okay, what is the Pareto Principle really? It's an observation on where the relative equilibrium state in an uneven system lies. So in an uneven distribution of resources, the equilibrium will tend to be that 10-30% of the recipients have 70-90% of the resources. This can be moderately useful, for instance if you are debugging software (the story of my life,,,), fixing a few bugs that turn up frequently can have a larger impact on the end result than fixing a lot of bugs that are rarely encountered. It's an efficiency thing.

But how on earth would it justify wealth inequalities? The unequal distribution of wealth is not caused by the Pareto principle but by capitalism and imperialism. That it tends to work out best when there are certain concentrations may be a fact, but that doesn't mean that you can't fix the inequalities.

[PhoenixAsh]

the principle came about from observing landownership in different countries. It was observed that ownsership of land was in fact distributed in a more or less 80-20% division. This division can also be observed in other subject.

Its a general rule of thumb. However its not a law of certainty.

Other divisions can be observed in free environments as well. Such as the 10-90 division. The 89-10-1 division and the 55-45 division.

As stated in the post above it is a rule of thumb relying on the context of the observed division.

80% of the wealth is owned by 20% of the people* (this goes for any division...80% of the top 10 richest people will own 20% of the total for that group....just aswell as 80% of the 10 poorest people will own 20% of that group). However it depends on the context of the society and the laws applicable in that society.

If you mandate wealth distribution the percentages will obviously change.






* It is disputed currently

[Nothing Human Is Alien]

Counter with another principle called "Facts of Life" which states that the working class creates 100% of the wealth in existence, no matter how it's divided up.