80/20 rule | Vilfredo Pareto | Joseph Juran

Image Source: Pixabay
Image Source: Pixabay


What is Pareto's Principle?

Econ 101

By Dibyak Kapali |

The Pareto principle proposes that for many outcomes — about 80% of consequences result from 20% of causes — asserting an uneven relationship between inputs and outputs. 

The concept, also known as the 80/20 rule, is named after the Italian economist Vilfredo Pareto, who in the late 19th century observed that 20% of the population in Italy controlled 80% of the country’s land.

Joseph Juran, in the early 1940s, observed that the concept applies to a wider field and named it Pareto’s Principle.

Juran also coined the term ‘vital few, trivial many’ suggesting that for many events, roughly 80% of the effects come from 20% of the causes — implying to focus on that significant 20 % rather than on causes that are trivial but many (80%). 

The Pareto Principle can be applied to a wide range of areas including business, management, economics, education, and others. For instance, 80% of business revenue comes from 20% of its clients.

Nevertheless, the Pareto Principle is only an observation, not a mathematical law. It does not apply in every circumstance, despite its broad applicability.

Dibyak Kapali is a Researcher and Social Media Lead at the_farsight. He is a student of Microbiology.

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