Editing Pareto principle (section)

{{short description|Statistical principle about ratio of effects to causes}}
{{for|the optimal allocation of resources|Pareto efficiency}}
{{specific|date=August 2022}}
[[File:Pareto principle.png|thumb|The Pareto principle may apply to fundraising, i.e. 20% of the donors contributing towards 80% of the total.]]

The '''Pareto principle''' (also known as the '''80/20 rule''', the '''law of the vital few''' and the '''principle of factor sparsity'''<ref name="NYT">{{cite news|url=https://www.nytimes.com/2008/03/03/business/03juran.html|title=Joseph Juran, 103, Pioneer in Quality Control, Dies|last1=Bunkley|first1=Nick|date=March 3, 2008|work=[[The New York Times]]|access-date=25 January 2018|archive-url=https://web.archive.org/web/20170906182706/http://www.nytimes.com/2008/03/03/business/03juran.html|archive-date=September 6, 2017}}</ref><ref name=":0">{{cite journal|last1=Box|first1=George E.P.|last2=Meyer|first2=R. Daniel|date=1986|title=An Analysis for Unreplicated Fractional Factorials|journal=Technometrics|volume=28|issue=1|pages=11–18|doi=10.1080/00401706.1986.10488093}}</ref>) states that for many outcomes, roughly 80% of consequences come from 20% of causes (the "vital few").<ref name="NYT"/>

In 1941, [[management consultant]] [[Joseph M. Juran]] developed the concept in the context of quality control and improvement after reading the works of Italian [[sociologist]] and [[economist]] [[Vilfredo Pareto]], who wrote in 1906 about the 80/20 connection while teaching at the [[University of Lausanne]].<ref>{{Cite book|last=Pareto|first=Vilfredo|title=Cours d'Économie Politique (in two volumes)|publisher=F. Rouge (Lausanne) & F. Pichon (Paris)|date=1896–1897}} [https://archive.org/details/fp-0148-1 Volume 1]  [https://web.archive.org/web/20130531151249/http://www.institutcoppet.org/wp-content/uploads/2012/05/Cours-déconomie-politique-Tome-II-Vilfredo-Pareto.pdf Volume 2]</ref> In his first work, ''Cours d'économie politique'', Pareto showed that approximately 80% of the land in the [[Kingdom of Italy]] was owned by 20% of the population. The Pareto principle is only tangentially related to the [[Pareto efficiency]].

Mathematically, the 80/20 rule is roughly described by a [[power law]] distribution (also known as a [[Pareto distribution]]) for a particular set of parameters. Many natural phenomena are distributed according to power law statistics.<ref name="auto1">{{cite journal|url=https://arxiv.org/PS_cache/cond-mat/pdf/0412/0412004v3.pdf|title=Power laws, Pareto Distributions, and Zipf's law|journal=Contemporary Physics|volume=46|issue=5|pages=323–351|last=Newman|first=MEJ|access-date=10 April 2011|bibcode=2005ConPh..46..323N|year=2005|arxiv=cond-mat/0412004|doi=10.1080/00107510500052444|s2cid=202719165}}</ref> It is an [[adage]] of [[business management]] that "80% of sales come from 20% of [[Client (business)|clients]]."<ref>{{Cite news|last=Marshall|first=Perry|url=https://www.entrepreneur.com/article/229294|title=The 80/20 Rule of Sales: How to Find Your Best Customers|date=2013-10-09|work=Entrepreneur|access-date=2018-01-05|language=en}}</ref>